Wall Street raises US payrolls estimates after solid ADP report

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Expectations for strong US jobs data are ramping up after a report on Wednesday showed US private-sector employment growing sharply last month.

In the wake of the ADP figures — which showed the US private sector adding 298,000 jobs in February, the most in nearly three years and well above predictions for a rise of just 187,000 — analysts at both Goldman Sachs and UBS revised upwards their predictions for the closely watched official nonfarm payrolls report, due out on Friday.

Goldman increased its forecast by 25,000, to more than 215,000. In a note, Goldman economists Spencer hill and Daan Struyven said that “large surprises in the ADP report tend to be predictive of the subsequent nonfarm payroll surprise”.

As a result, “we believe the sharp acceleration in today’s report provides additional evidence for a strong employment report this Friday,” they wrote.

Meanwhile, UBS economist Samuel Coffin also took a rosier view of Friday’s report on Wednesday in the wake of the ADP report, revising his payrolls prediction to 225,000, from the previous 200,000.

While noting a recent trend towards an upwards bias in ADP’s estimates versus the official figures from the Bureau of Labour Statistics — the average difference between the two reports’ private-payrolls estimates has been about 39,000 over the past 12 months, he said — “even allowing for that sized error would yield a very strong BLS estimate”, Mr Coffin added.

Economists surveyed by Bloomberg have estimated Friday’s report to tack on 200,000 jobs, versus the 227,000 gain reported for January.

The nonfarm payroll report is the subject of even more scrutiny than usual, as a big miss may be the only thing to deter the Federal Reserve from raising interest rates when it meets next week, with federal fund futures currently signalling a 100 per cent chance of a rate rise.

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