NFP preview - page 3

 

Oct NFP: 'Enough Here To Be Hawkish In Terms Of Fed Expectations'


US employment data for October helped nudge us one step closer to a Fed hike in December, as the central bank got the more evidence of a rebound in growth that it was looking for. The payrolls gain was in line with our somewhat below consensus call, but the 161K in net hiring was supplemented by a net upward revision of 44K to the prior 2 months. Gains were in services, with the goods sector flat. The jobless rate ticked down to 4.9%, athought that was on a drop in labor force participation.

One notable feature was a healthy 0.4% rise in average hourly earnings that took the yearly change to 2.8%, continuing an uptrend that is starting to suggest we're not that far from full employment.

All told, enough here to be hawkish in terms of Fed expectations.

 

NFP Preview: Strong Data Already Priced In, Wage Data Crucial


Given the expectations that are already priced in, the employment data will have to be particularly strong to trigger further sustained dollar gains and an increase in US yields. There will, therefore, be value in fading dollar gains and buying dips in Treasuries if the data is close to or modestly above expectations.

Similarly, the data would need to be exceptionally weak to disrupt December Fed tightening plans and there will be value in buying any sharp dollar dips on any figure in the 110,000-135,000 range, although this would be a very short-term play only given pressure for a wider dollar correction.

Consensus expectations are for a non-farm payrolls increase of around 165,000 for November with an unchanged unemployment rate of 4.9% and increase in hourly earnings of 0.2% for the month.

The initial focus in the employment report will be on whether the data disrupts the Fed’s plan to hike interest rates at the December meeting.

Minutes from the November FOMC meeting and subsequent comments from Fed officials clearly indicate that the Fed is planning to raise rates in December unless there is a major negative event before the meeting and it will need to be a very serious development to trigger a cancelation.

An extremely weak employment report would be a potential barrier to raising rates, although the data would need to be extreme. From the FOMC perspective, an increase in employment of around 120,000 is sufficient to keep the unemployment rate stable.


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Preview: What To Expect From NFP? - Views From 10 Major Banks


CIBC: The pace of hiring should look more or less unchanged when November’s data is released on Friday. With the economy progressing towards full employment, job gains are likely to stabilize around the 160K mark. While that’s noticeably slower than the monthly gains seen earlier this year, it’s well ahead of the roughly 100K needed to soak up population growth. A print of 165K in November would see the unemployment rate hold steady at 4.9%.

Nomura: We forecast that nonfarm payrolls increased by 160k in November, comparable with the gains seen in October. We expect a modest rise of 5k in government payrolls, implying that private payrolls increased by 155k. Incoming data on the labor market, for the most part, imply steady employment activity with limited involuntary layoffs in NovemberWe expect the unemployment rate to decline further to 4.8% in November. On wages, we expect growth in average hourly earnings to slow to 0.1% m-o-m (2.7% y o-y) following a sharp increase of 0.4% m-o-m in the previous month. We think that the prior month’s strong wage growth was artificially amplified by inclement weather holding down the average weekly hours worked during the survey reference period. To that end, we think that some payback is warranted in November as conditions returned back to normal.

SEB: Our forecasts are for 200k on the headline, 190k on private payrolls, 4.8% on the unemployment rate and 0.2% on average hourly earnings. 

BofA Merrill: Recent labor market data has continued to show solid improvement. We expect the trend to continue in November with 170,000 in nonfarm payroll growth, a slight deceleration from the 176,000 average over the prior three months. We expect 165,000 in private payroll growth, with a modest 5,000 expansion in government payrolls. We expect the labor force participation rate to remain at 62.8% and the unemployment rate to also remain unchanged at 4.9%. We expect a softer 0.2% mom gain in average hourly earnings after the strong 0.4% mom pop last month, leaving the year-over-year rate at 2.8%. This shows continued improvement in wage growth, but still a less-thanhealthy 3%-4% pace of growth. Remember that the strong gain in average hourly earnings last month was concentrated in three categories: mining, utilities and information technology. We think that there is propensity for a modest reversal given the magnitude of the increase in all three. There are some risks of a weaker print and/or a downward revision to September wage growth. We expect average weekly hours to remain unchanged at 34.4. 

Barclays: We see asymmetric risks to the USD this week as the employment report takes central stage. A number close to our expectation of 175k or even lower would keep the Fed on track as it is assumed that a deceleration in job creation is normal as the labour market is near full employment. On the other hand, a higher number (closer to 200k) would signal that the momentum is still strong, and that additional stimulus would probably lead the Fed to act faster, accelerating USD trend. We expect the unemployment rate to decline to 4.8% from 4.9%, average hourly earnings to rise 0.2% m/m and 2.8% y/y, and the average workweek to remain unchanged at 34.4 hours.

Goldman: The October employment report will be released on Friday, and we expect nonfarm payrolls to rise by 200k (consensus +175k, last +161k), unemployment to edge down to 4.8% and average hourly earnings to increase by 0.1% month-on-month.

Credit Agricole: For November non-farm payrolls our economists expect a slight acceleration to 175K, with the unemployment rate unchanged at 4.9%. After a 0.4% MoM jump in October, average hourly earnings growth should slow to 0.1% MoM, partly reflecting calendar effects. This would bring down the YoY rate to 2.7% from 2.8%.

SocGen: We look for another 165k increase in non-farm-employment, a 4.8% unemployment rate and 2.8% wage growth. Consistent with a December rate hike but a familiar story all the same and one that leaves us thinking that well over 90% of the widening trend in Treasuries/Bunds is already behind us. Further EUR/USD weakness will be much more about European politics than the relative growth trends.

UniCredit: US nonfarm payrolls likely rose another solid 175,000 in November. That is slightly faster than the 161,000 seen in October, but broadly in line with the average seen over the past three months.  If anything, the most timely labor market indicator points to some upside risks, as jobless claims dropped to a 43year low in the middle of the month. In addition to very low layoffs, labor demand has remained strong with the number of jobs close to a record high.  The jobless rate likely stayed at 4.9%, after declining in October. As the US economy approaches full employment, wage gains continue to rise, while payroll gains slow gradually towards the trend growth rate in the labor force.

UOB: We think the NFP is likely to add 200,000 jobs in November (vs median forecast of 180,000 and 161,000 in Oct) while the unemployment rate could edge lower to 4.8%, from 4.9% in Oct.


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Want more holidays? OK then, but be back for NFP data due Friday (preview)




The first NFP report for the year will be on Friday (6 January). The data will be for December, so its officially the final report for 2016 I guess.

Whatevs!

OK, so December Nonfarm payroll
  • Due at 1330GMT on 6 January 2017
  • Consensus expected is 178k (this may change as we get closer to the day and more estimates come in, but for now the expected is pretty much the same as for the November report)
  • Prior was 178K
  • Unemployment is expected at 4.7% (prior 4.6%)
  • Average hourly Earnings expected at +0.3% m/m (prior -0.1% in November, which was a disappointment)

Something to be aware of for the December report; out of the past 10 years the December result has been lower than November for 7 of those years (and above for 3).
Statistically significant? Nup. Just something to be aware of (and probably lecture your friends down the pub about ... I have plenty of other super-boring pub chat if you need more).

Also, watch the unemployment rate - the 'under employment' rate ticked a bit lower in November, to its lowest since early 2008. A good sign.

There will be more on the NFP to come this week.
 

Goldman Sachs preview of the nonfarm payroll - what to expect


Goldman Sachs on Friday's NFP from the snowy swamp capital of the US

(Looks like snow for Washington DC may make the release more exciting than usual:

From GS:
  • Forecast is at a gain of 180K jobs
  • For unemployment rate, GS is at 4.7%
  • Average hourly earnings, looking for +0.3% m/m and +2.8% y/y
Say Goldman Sachs:
  • Forecast for steady payroll gains
  • Reflects encouraging labor market surveys overall
  • As well as our expectation of above-trend growth in the transportation industry related to strong online holiday shopping
 

December NFP: US Non-Farm Payrolls Increase 156,000, Average Earnings Beat Expectations At 0.4%


According to the latest Bureau of Labor Statistics (BLS) data, there was an increase in US non-farm payrolls of 156,000 for December compared with an expected gain of around 177,000 for the month.

The November increase was revised higher to 204,000 from the 178,000 reported previously.

The unemployment rate was in line with expectations with an increase to 4.7% for the month from 4.6% previously as the participation rate edged higher to 62.7% from 62.6%.

Manufacturing employment increased by 17,000 for the month after small declines for the previous two months, while there was a small decline in construction jobs for the month.

There was a relatively weak increase in retail employment and there was a decline in temporary help services jobs of over 15,000 for the month, while government employment increased by 12,000.

There was an increase in average of earnings of 0.4% for December following the 0.1% decline for November, which pushed the annual increase to 2.9% from 2.5% previously given that earnings were flat in December 2015. This was the strongest annual increase since June 2009. There was no change in average weekly hours at 34.3.


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