Why are we even mentioning the word “taper” and should employment in 2021 be nearly as weak as in January?: The MUFG Global Markets Podcast

In this week’s podcast, U.S. Rates Strategist, John Herrmann, does a deep dive into both the establishment survey and the household survey. He finds a few distortions in the technical aspects of the payroll report that may turn around quickly to support payroll computations over the months of February through June 2021. For the unemployment rate, John’s work continues to uncover the roles played by two significant forces that act to depress the reported U3 unemployment rate (by a few hundred basis points).

All combined, John remains confident that his year-end forecast for the U3 unemployment rate likely may be attained – that of 4.042% – which is far lower than the FOMC’s projection (5.00%), lower than the consensus estimate (5.50%), and lower than even the lowest estimate in the Bloomberg survey (4.10%). In John’s view, markets “taper chatter” likely will become quite loud as the year progresses.  

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