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US, June 2016 NFP Preview

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The US nonfarm payrolls data will be released today, on July 8th, 2016 by the Bureau of Labor Statistics at 12:30 GMT. Heading into the event, the consensus estimates for the month of June are as follows:

  • Monthly Nonfarm payrolls: 165k – 175k
  • Unemployment Rate: 4.80%
  • Average hourly earnings m/m: 0.20%

Previous (May NFP Report)

  • Monthly Nonfarm payrolls: 38k vs. 160k
  • Unemployment Rate: 4.70% vs. 4.90%
  • Average hourly earnings m/m: 0.20% vs. 0.20%
  • Average hourly earnings y/y: 2.50% vs. 2.50%

US Unemployment Rate (April 2015 – May 2016)

US Unemployment Rate – 4.70%, May 2016
US Unemployment Rate – 4.70%, May 2016

In May, the US unemployment rate fell to 4.70%, more than the forecast 4.90%. The declines in the unemployment rate came amid lower participation rate. Surprisingly, the US economy was shown to add only 38k jobs on the month, well below median forecasts of 160k and was the worst number since September 2010. In the past three months, US employment growth averaged 116k, which was a strong decline from the average of 219k jobs prior to the May’s report. The declines came as some 34,000 Verizon workers went on a strike with the labor dispute spilling over into the monthly jobs report. Wage growth rose 5 cents, to $25.59 in May, or about 2.50% increase from a year ago.

The markets are optimistic that the May report was just an anomaly with the general consensus expecting to see the monthly number increase while also expecting the unemployment rate to tick higher to 4.80%.

Yesterday, the ADP payrolls report showed 172k jobs being added, more than the expected 158k jobs. Hiring was driven by the small and medium sized business, but there was a persistent weakness in the construction and manufacturing sector.

June 2016 Payrolls Estimates

Danske Bank: Estimate that the US non-farm payrolls increased 150,000 in June, which is slightly lower than the consensus, while average hourly earnings are estimated to rise 0.20% on a month over month basis, in line with the broader estimates. On the unemployment rate, Danske Bank forecasts the unemployment rate to rise back to 4.80%.

“We expect jobs growth in June has rebounded from the low level in May. We see the May jobs report more as a ‘one off’ rather than a new normal, although it magnifies the signal that job growth has indeed slowed lately. Leading indicators point to slower, but solid job growth. The Markit PMI employment index still points to modest job growth and initial claims figures have averaged lower in June than in May, indicating that job growth has rebounded in June.”

Nordea: Estimate that the US non-farm payrolls increased 175k in June, matching the broader consensus view and agree that the US unemployment rate will edge higher to 4.80% during the month and maintaining a 0.20% increase in average wages.

“We expect a 175k gain in nonfarm payrolls in June after the weakest advance in almost six years in May, boosted by the return of 35k striking Verizon workers. Recent indicators including jobless claims suggest that the 38k gain in May payrolls exaggerated the labour market weakness.  We forecast a 0.2% rise in average hourly earnings in line with the gain in May. Due to base effects the year-over-year growth rate should jump from 2.5% to 2.7%.”

Nomura: Calls for +160k Jun jobs, says would show a steady pace of hiring but slower than in late 2015-early 2016. Risks are 2-sided, could see a rebound from May but also vacancy postings dropped.

Amherst Pierpont: Calls for +190k Jun jobs, says not shocking to see job growth slow, but it’s probably not as slow as initially reported in Apr-May. Underlying jobs gains may settle near +150k/mo, a “natural cooling” as the supply of workers dries up. A-P says a +0.2% AHE might accelerate the y/y pace to +2.7%.

BNP: “Expect a moderate rebound in June payrolls that still suggests a declining trend,” estimates +130k jobs for June.

TD: TD’s jobs preview says there are upside risks to their estimate of +175k jobs, and this means “5-year/30-year curve should continue flattening as the long-end outperforms.”

Goldman Sachs: Goldman’s Jun jobs preview calls for +210k jobs, says “we also see scope for improvement beyond Verizon, as other labor market data have generally looked encouraging.” Estimates 4.8% UR and +0.1% AHE due to calendar quirk.

Morgan Stanley: MS’s jobs report preview calls for +180k jobs but says this is +145k ex strike, and estimates +0.2% AHE with no calendar bias. “For June, though, we look for a modest pickup in the hiring rate as the early year tightening in general financial conditions and rise in recession worries eased.” Also, says -0.3pp drop in the unemployment rate to a cycle low 4.7% in May “was caused by a 0.2pp drop in the labor force participation rate rather than any upside in job growth.”

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