Since Trump took office and issued a series of market-shocking policy decisions, there seems to be less attention on traditional USA macro data as investors' focus shifted. However, tonight's upcoming USA non-farm employment report may be an exception - even President Trump himself may focus on the annual revision numbers provided by the USA Department of Labor, ready to "fire at any time"...

Unlike previous non-farm nights, tonight's USA employment report has two major highlights for many Wall Street professionals on the surface:

① With the unusually explosive non-farm employment data exceeding 0.2 million for two consecutive months, will the USA labor market continue to be crazy after entering 2025?

② The USA Department of Labor typically announces the "annual revision" of non-farm data before the non-farm release day in early February. The preliminary revision from last August showed a downward adjustment of 0.818 million jobs in non-farm data for the year ending last March. What will the final version be this time? If it is further revised down, will there be a magical sight of the "million job army" disappearing in the USA?

For many investors questioning the "accuracy" or "truthfulness" of the initial version of non-farm data released by the USA Department of Labor, tonight may be a key moment for them to understand the true state of the USA employment market...

Highlight ①: How will January's non-farm data perform?

Let's first look at the common points of interest on each non-farm night: How will the USA employment market perform in January, or at the beginning of 2025?

The USA Department of Labor is scheduled to announce the January non-farm employment data at 9:30 PM Beijing time tonight. According to estimates compiled by the industry, economists currently expect an increase of 0.17 million in non-farm employment in January, while the unemployment rate is expected to remain stable at 4.1%.

Many investors may still vividly remember the unusually hot non-farm data released earlier last month—at that time, the data from the USA Department of Labor indicated that 0.256 million jobs were added to the economy in December, far exceeding economists' expectations. Meanwhile, the unemployment rate unexpectedly dropped from 4.2% in November to 4.1%.

Looking ahead to January, influenced by cold waves in many parts of the USA and the wildfire in Los Angeles, market participants generally expect that the January non-farm data may struggle to replicate the previously consistent performance of over 0.2 million. Of course, on the other hand, based on the performance of forward indicators such as the small non-farm ADP data, the lower bound forecast shouldn't be too low.

The ADP payroll processing company announced Wednesday that the private sector in the USA added 0.183 million jobs in January, significantly higher than the pre-estimate of 0.15 million from economists, and also higher than the adjusted December data from last year. After a significant revision, the data jumped from 0.12 million to 0.176 million. The data indicates that the USA job market has not yet shown signs of softening under high interest rate pressures.

Lydia Boussour, a senior economist at EY, wrote in a forecast report, "Against the backdrop of tariff fears, the January non-farm employment report may send a reassuring signal indicating a good economic condition at the beginning of this year. We expect non-farm employment to steadily increase by 0.19 million, higher than the widely expected 0.17 million, but lower than the strong job growth rate reported in December."

Overall, economists generally expect that a range of labor market data covered in the January employment report should meet the narrative of a "generally stable" labor market described by Federal Reserve Chairman Powell at the news conference following the monetary policy meeting on January 29.

Chris Larkin, a strategist at Morgan Stanley's E*Trade platform, stated, "So far this week, the data highlights that the USA labor market does not appear to be engaging in much hiring or firing. We will see if the monthly employment report on Friday depicts a similar situation. Meanwhile, traders may tend to hold back."

From the perspective of Federal Reserve policy, investors might also prefer to see that tonight's non-farm data does not perform "too well"—because if the job market remains hot, it may actually hinder the Fed's rate-cutting process.

Logan, the president of the Federal Reserve Bank of Dallas, stated on Thursday that the Federal Reserve may need to keep interest rates at the current level for at least a "considerable period of time" as long as the job market does not significantly cool, and even if inflation slows, it may not be a reason to further ease policy. On the other hand, Logan believes that if circumstances such as a weakening labor market or slowing economic growth occur, further easing of policy may be required.

Highlight ②: How will Historical Data be "revised"?

After looking at the conventional January Non-Farm Payroll Preview, let's also focus on another highlight tonight - the annual major revision of previous Non-Farm Payroll data.

Every year, when the January employment report is released, the U.S. Bureau of Labor Statistics revises the number of jobs up to the end of the previous year. These adjustments usually do not attract much attention. However, this week is bound to become a focal point for many. This is because the preliminary correction made by the agency last August showed that in December of the previous year, the downward adjustment of Non-Farm Payrolls reached an astonishing 0.818 million, the largest decrease since 2009.

Notably, once this preliminary correction was released last August, the topic of "0.81 million jobs disappearing" quickly drew significant public attention. Even Trump, who was then in the thick of the election, directly fired back on Social Media, claiming that the monthly Non-Farm Payroll data under the Biden administration was "fraudulent"! From hindsight, the Federal Reserve decided to cut rates by 50 basis points a month later (in September of last year), seemingly reflecting growing concerns about labor market prospects.

So, how will the U.S. Bureau of Labor Statistics adjust this year's annual major revision of Non-Farm Payrolls? Why are Non-Farm data revised every year? Is it possible that the officially released Non-Farm data for previous months is not accurate?

Undeniably, the answer is indeed so.

Just as U.S. poll data often does not fully reflect the actual support level in an election, the initially released Non-Farm Payroll data each month is not completely accurate. The preliminary estimate of Non-Farm employment data is mainly based on sampling surveys of businesses, covering only about 0.66 million institutions, with a response rate of only about 40%. In fact, to some extent, due to issues like delayed responses from companies, when the Non-Farm data for a certain month is released, the U.S. Bureau of Labor Statistics will also make preliminary corrections to the Non-Farm data for the previous two months.

More accurate employment data actually comes from the comprehensive "annual calibration" conducted by the USA Bureau of Labor Statistics every year: its content includes multi-level calibrations based on unemployment insurance data—Quarterly Census of Employment and Wages (QCEW), Business Employment Dynamics (NBD), census data, and more.

Among them, the most significant revision is based on QCEW unemployment insurance data, with the revision process divided into two parts: preliminary estimates are released in mid-August (which is when we saw last August's report of "0.81 million jobs disappearing"), and final revised values are published simultaneously with the January employment report in February of the following year. QCEW can effectively compensate for the limitations of the initial non-farm survey sample—it fully accounts for all 11 million Institutions/worksites in the USA, with a response rate exceeding 90%.

Jed Kolko, who was in charge of economic statistics at the Department of Commerce during the Biden administration, previously explained that "revisions are the way statistical agencies achieve timeliness and accuracy. Real-time data such as employment reports are later revised to match other more accurate but time-consuming data sources to collect and publish."

Currently, the preliminary calibration of QCEW shows that as of last March, non-farm payrolls were revised down by 0.81 million, which may not change significantly. An important question now is whether the hiring activity from April to December of last year will also be significantly lower than the previously published non-farm data. According to prior data released by the USA Bureau of Labor Statistics, the employment market added an average of 159,000 jobs per month during this period, with over 200,000 jobs added in each of the last two months of last year.

If the employment growth over these nine months is reduced to an average of 125,000 or fewer, the latest revised employment data would indicate that the labor market is much weaker than it appears. This could reignite discussions about the Federal Reserve reducing interest rates in the near future. Of course, the data for these nine months will be assessed in conjunction with new parameters such as Business Employment Dynamics (NBD).

Currently, opinions on the latest revised data are mixed in the industry. Standard Chartered's Steve Englander believes that further revisions of QCEW since August increase the likelihood of a non-farm revision downwards of 0.67 million. Economists at Pantheon Macroeconomics also expressed that they anticipate the non-farm revision on Friday will narrow to 0.67 million, based on adjustments to QCEW and Business Employment Dynamics.

However, Bloomberg's economic model predicts that as of last December, the total number of non-farm employment might be revised down by 0.934 million—comprising 0.7 million from QCEW and 0.234 million from Business Employment Dynamics, further increasing from the preliminary calibration of 0.818 million as of March 2024.

If the USA non-farm revision really steps into the unprecedented "million" range, investors might not be surprised. In a way, Trump might actually prefer a greater non-farm downward revision since these data are merely "old accounts" left over from the Biden administration, and a larger revision could smooth out the fluctuations in employment data after he takes office.

Interestingly, during Trump's previous term, the USA Department of Labor also engaged in the "initial non-farm good, next year sharply revised" tactics. At the annual revision ending in March 2019, the USA Department of Labor downgraded 514,000 jobs...

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