Looking For Softer-Than-Consensus But Still Strong February Employment Report

I see a somewhat softer-than-consensus February Employment Report, but still strong enough to keep open the door for a March Fed rate hike.  It should be a positive for the stock market and a positive for the longer-end of the Treasury market, but a negative for TIPS.

A.  Payrolls -- Speedup to a below-consensus 175k from 151k in January.  Consensus is 190k.
1.  Layoffs appear to have eased off m/m:

       a.   The 4-week average of Initial Claims fell to 272k going into the February Payroll Survey Week from 285k into the January Week.

       b.  Challenger Layoff Announcements fell to 62k from 75k in January.   But these are not seasonally adjusted, so may not be comparable on a m/m basis.

2.  But, Hiring remains cautious:

       a.  Continuing Claims rose to 2.257 Mn in the February Survey Week from 2.246 Mn in the January Week, despite the decline in layoffs.

       b.  Uncertainty about the outlook stemming from the financial market turmoil may not have abated in early February.  The VIX averaged 24.1 in February through the survey week, versus 23.6 in January through its survey week.

3.  The weather was supportive of job growth in February, similar to January.

B.  Unemployment Rate -- Risk of an uptick to 5.0%.  Consensus is for a steady 4.9%.
1.  Conference Board Job Components worsened in February.

2.  Continuing Claims rose between survey weeks.
 
C.  Average Hourly Earnings --  A below-consensus +0.1% m/m, after +0.5% in January.  Consensus is +0.2%.
1.  Calendar considerations point to a 0.1% m/m Average Hourly Earnings.

2.  But, the y/y should be steady at 2.5% -- which would confirm a modest uptrend in the underlying pace of AHE.

D.  Nonfarm Workweek  -- Steady at a high 34.6 Hours.   Consensus is the same.
1.  My suspicion is that the uptick in the Workweek to 34.6 Hours in January from 34.5 Hours in December resulted from companies having substituted longer hours by existing workers for hiring -- as a result of the heightened uncertainty stemming from the financial market turmoil.

2.  This substitution may have persisted into February, based on the VIX.

3.  But, with the turmoil having subsided subsequently, the high Workweek bodes well for a speedup in March Payrolls, as hiring catches up to the demand for labor.