FTN Financial sees nonfarm payroll data getting stronger
The street expects nonfarm payroll data for December to show gains upward of 200,000, wiping away much of the disappointing figures for November, according to one analyst. Jim Vogel, of FTN Financial, said employment figures should improve this year, possibly even adding as much as 300,000 new jobs monthly in the third quarter, up considerably from the average of 115,000 a month during the second half of last year. "Rather than the v-shaped employment spurts anticipated in 2010 to counter the deep cuts in 2009, most forecasts now look for steadily increasing gains to anchor the recovery," Vogel said Monday. In early December, the Labor Department reported nonfarm payroll employment edged up in November, adding just 39,000 jobs, while the unemployment level rose to 9.8%. The Department's Bureau of Labor Statistics is set to announce December data Friday. Analysts surveyed by Econoday expect that payrolls increased by 140,000 new jobs with a range of estimates from 98,000 to 165,000. Vogel said expected normal reversal of unusual bond strength from last week and renewed equity momentum to start the new year have sent yields on 10-year Treasurys back higher than 3.35%. The pattern of the past two years saw January reverse illiquid December trading, according to Vogel, and "a repeat implies the 10-year will start 2011 in a 3.35%-3.52% range until more data arrive." Vogel expects the pricing of bonds repurchased by the Federal Reserve Monday as part of quantitative easing program to be "the first important technical." "Post-buyback selling marked most of December except the week right before Christmas when most books were wrapped up tight," he said. "Traders will be watching the flow patterns closely today for indications of whether selling is going to resume as the next large QE2 operation isn't until Thursday." With the street whispers calling for the increased payroll figures, "that trader theme underlies 10-year yields in the 3.40s to the high 3.50s," according to Vogel. "In building a 2011 rate forecast, fixed income investors could do worse than charting payroll growth and accompanying unemployment rate trends each month and targeting (U.S. Treasury) rates accordingly," he said. Write to Jason Philyaw.