Why I’m not looking for a weak NFP number

After a blowout number last month, and one that did not exactly jibe with ADP many on the bearish side are expecting a lag on the BLS data will point to a rather weak number for the February employment situation. Here’s ADP v NFP since 2001.

As that chart shows NFP is actually great deal more noisy than ADP and what you can’t tell from that chart is that it’s much more prone to revisions.

This lead me to look into some other correlations (outside of tax receipts which factors heaviest into most sell side models) after kicking around a few things a rather obvious relationship stuck out. Over the past 35 years each time the 4 week moving average on initial claims broke under 375k then NFP trended above 250k. Here’s a chart of that relationship with claims inverted.

This points to rather strong job creation in the medium term which on a month to month basis should show up in strong readings. That said NFP as previously mentioned is a noisy metric. I would change my tune completely if ADP came in under 150, but for the time being I think it’s far better to position for strong data points on both readings.

9 thoughts on “Why I’m not looking for a weak NFP number

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