The US Nonfarm Payrolls Data: What to Expect?

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The US nonfarm payrolls data will be released today, on August 5, 2016, by the Bureau of Labor Statistics at 1230 GMT. The July payrolls report is forecast as follows:

  • Monthly nonfarm payrolls: 180k
  • Unemployment Rate: 4.80%
  • Average hourly earnings m/m: 0.20%
  • Average hourly earnings y/y: 2.60%

Previous (June NFP Report)

  • Monthly nonfarm payrolls: 287k vs. 180k
  • Unemployment Rate: 4.90% vs. 4.80%
  • Average hourly earnings m/m: 0.10% vs. 0.20%
  • Average hourly earnings y/y: 2.60% vs. 2.60%

US Unemployment Rate (April 2015 – June 2016)

US Unemployment Rate – 4.90%, June 2016
US Unemployment Rate – 4.90%, June 2016

Recap of June Payrolls Report

The June NFP report showed that the nonfarm payrolls increased to a seasonally adjusted print of 287k marking one of the strong jobs report since October 2015. The payrolls also beat the consensus estimates of 175k by a strong margin and reversed the disappointing May jobs report which was revised from 38k to only 11k.

The unemployment rate also ticked higher by 2bps, rising from 4.70% in May to 4.90% in June. Following the better, than expected payrolls print at the July FOMC meeting, the Fed’s statement said: “the labor market strengthened, on balance, payrolls, and other labor market indicators point to some increase in labor utilization in recent months.” The statement was in contrast to the June FOMC meeting where the Fed took a more cautious tone on the jobs report. The Fed also said that “some further improvement in the labor market” was required.

Following the beat on estimates, the US dollar index closed with a doji, but a few sessions later, the price started to rally with the dollar index seen heading to 97.35 before posting a steady decline since then. Currently, the dollar index stands at 95.00 – 94.75 support level posting two days of consecutive gains, but the price is seen struggling near the minor resistance of 95.50 – 95.75. A strong breakout from this resistance is required to ascertain any further gains.

July 2016 Payrolls Estimates

CitiFx: Steve Englander from CitiFx notes that they are expecting the US NFP to come in at 170k with the unemployment rate falling to 4.80%. Citi expects the US average hourly earnings to rise 0.30% against consensus estimates of 0.20%. Citi notes that there is a strong reason for the average hourly earnings to rise as much as 0.40% on a month over month basis. In terms of market expectations, Citi notes, “Our net expectation is for bond yields to rise higher and skittish equities, but ultimately no big sell off and further EM buying after investors decide that even the AHE surprise is not enough to worry the Fed.”

Morgan Stanley: MS estimates that the US economy added 180k jobs in July and notes that “this would be down from June, but above the 147k average in Q2.” MS also expects no change in the US unemployment rate which stands at 4.90%, while average hourly earnings are expected to remain steady at 0.30% on a month over month basis. On a year over year basis, MS expects AHE to be steady at 2.60% but notes that they expect the hourly earnings to continue gradually rising to 3.0% through 2017.

Nordea: Analysts at Nordea Bank expect a steady payroll print for July and expect an NFP print of 185k, noting that this number would make the Fed more comfortable about the economic outlook and would support the case for a rate hike later in the year. Nordea notes that “overall the trend in the pace of payroll growth remains weaker compared to last year due to tightening labour markets.” On the unemployment rate, Nordea expects a fall to 4.80% in July and expects at 0.30% increase in average hourly earnings, while remaining steady at 2.60% on a year over year basis.

Danske Bank: Danske estimates a payrolls gain of 175k in July, close to the consensus estimates of 180k. “Overall employment growth has levelled off this year compared with the past couple of years, despite the strong June report,” analysts at Danske note. On average hourly earnings, Danske expects a 0.20% increase on a month over month basis but expect the unemployment rate to remain unchanged at 4.90%.

Goldman Sachs: Analysts at Goldman are the most bullish, expecting a 190k print for July, higher than the 180k consensus estimates but expect the unemployment rate to remain steady at 4.90%. GS also notes that the average hourly earnings could rise 0.30%, above the consensus estimates. “Our wage tracker—which aggregates four measures of wage growth—has accelerated to 2.8% year-on-year in our preliminary Q2 estimate, a sign that diminishing slack is boosting wage growth,” GS said in a note.

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