We expect a significantly lower NFP for Feb'25 at 60k than market consensus of 160k. While the ISM services employment index has come stronger than estimates, we derive our nos from Challenger Job cuts, ISM manufacturing employment index which came lower than estimates & higher continuing claims. We also believe that weather related rebound in Feb of 45k (from Jan's poor weather conditions) might be offset by 100k drag due to weather disruptions in Feb, giving a net impulse of 50-60k for weather reason itself. Currently the NFP data is whispered to be lower (120k) than consensus expects. We believe markets will be more sensitive to weaker data (i.e. higher unemployment rate, lower non-farm payrolls) than to stronger prints. Risks are skewed towards a selectively softer USD, steeper curves, and lower equities. A higher unemployment rate (UR) and/or lower non-farm payrolls (NFP), if seen in February as per our assumptions, would underscore US stagflation risks at a time when Federal workforce, program-funding cuts are just beginning and the impact of implemented and potential tariffs remains unclear. It would suggest the labor market is already on weaker footing into these risks, likely to weaken even further as these risks feed into the real economy. 2 factors critically drove our assumptions. First being the Challenger job cuts nos released today for Feb'25. Job-cut announcements totaled 172,017 in February, a 103% increase from last year and the most since July 2020. It also marks the highest number reported in a February since 2009. The federal government was responsible for the largest share of cuts, at more than 62,000. The 2nd factor being the severe job cuts in education sector due to end of Biden era programs. February typically has been one of two peak months for hiring education workers, the other being September, when the school year begins. In a normal February, the education sector accounts for about 60%-70% of total hiring, so lower job gains in this sector risks a substantial undershoot of seasonal expectations. But the end of 2 programs ESSER III & SLFRF of Biden era produced a drag of 25k in the government sector and 21k in the private sector in the education sector. We believe US equities might see further sell off after a weak NFP data as well as USD falling against GBP/CHF/NZD more than other pairs. We expect a steeper UST curve if our assumptions play out and we get a soft NFP no.
