TD Securities economists anticipate a slowdown in US Nonfarm Payrolls (NFP) for February, projecting a headline increase of 60,000 jobs, down from the unexpectedly strong 130,000 jobs reported in January [1]. Within this figure, private payrolls are expected to rise by 70,000, while government employment is forecast to decline by 10,000 [1]. The moderation in private payrolls is largely attributed to softer healthcare hiring, which had previously contributed significantly to job gains, partly due to Birth-Death adjustments that may now revert [1].
The unemployment rate is expected to remain stable at 4.3%, although TD Securities notes that risks are skewed toward a possible increase to 4.4% rather than a decrease to 4.2% [1]. This outlook is influenced by the expectation that lower new- and re-entrants drove the unemployment rate down in January, potentially leading to a larger-than-expected reversal in February [1]. Additionally, the Bureau of Labor Statistics (BLS) will implement a population adjustment in this report and revise January figures, which could impact the unemployment rate [1].
Average hourly earnings (AHE) are forecast to moderate to 0.2% month-on-month, translating to a 3.7% year-on-year increase [1]. TD Securities highlights that the timing of the survey week, with the 12th of February falling on a Thursday, tends to result in weaker AHE prints [1].
Overall, TD Securities views the risks for this report as dovish, suggesting that labor market stabilization supports the Federal Reserve maintaining its current policy stance [1].
CONCLUSION
TD Securities expects a notable slowdown in US job growth for February, with stable but potentially rising unemployment and softer wage gains. The moderation in labor market data is seen as supportive of the Federal Reserve holding rates steady, with risks skewed toward a more dovish outcome.