TD Securities’ Global Strategy Team expects January US Nonfarm Payrolls to show subdued job gains of 45k, below the 70k consensus, with the Unemployment Rate steady at 4.4%. They see hawkish risks if the rate dips to 4.3%. Recent weak Retail Sales data trimmed their Q4 GDP tracking to 2.6% q/q annualized.

Payrolls, yields and consumer signals

"On Wednesday, the majority of the focus will be on payrolls, where we expect a headline of 45k and the UE rate to remain unchanged at 4.4%. We would expect a bear flattening of the curve with markets giving more weight to the UE. The 10y auction will be in the afternoon."

"We expect January payrolls to show that job gains remain subdued at 45k (consensus: 70k), in line with the recent trend. Private payrolls likely saw a 40k gain, supported by outsized gains in healthcare and construction. We look for a modest 5k gain in government payrolls."

"The UE rate likely went sideways at 4.4%, reflecting labor market stabilization that led to a pause in cuts at the January FOMC. There is additional uncertainty in January prints due to the BLS's population adjustment, which we expect to be negative."

"We view risks as largely hawkish given the recent move lower in continuing claims, and believe a decline to 4.3% is more likely than an increase to 4.5%."

"Retail sales surprised to the downside in December, printing flat vs expectations for a still firm expansion at 0.4% m/m (TD: -0.2%). The main driver to the downside was the control group which unexpectedly contracted 0.1% (TD: +0.1%, cons: +0.4%), The control group's November original 0.4% increase was revised lower to 0.2% m/m."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)