Should we expect a positive NFP surprise today ?
Summary: We will look towards a 184K headline print (above consensus) and are neutral on the unemployment rate and hourly earnings.
We see more upside than downside risk for payrolls in December following the positive ADP print and especially the continued employment growth in small and medium companies. Our optimistic bias regarding the headline print is due to the strong employment growth momentum observed in small companies (1 to 49 employees) which tends to be a good indicator of the US labor market and the broad state of the economy. December data was out very positive at +68K. And, as you can see in the chart below, the correlation between U.S. payrolls and the employment growth in small companies is decent at 0.74. We will look towards a 184K headline print for U.S. payrolls, with is above consensus (153K), and we are neutral on the unemployment rate, which should stay flat at 3.5%, and on hourly earnings, which are expected at +0.3% MoM. In terms of monetary policy, the expected labor market data are consistent with a Fed pause.
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