Payrolls Preview: Blame Weakness On Weather, Strength On Trump
By Tyler Durden
With all eyes likely on wage growth indications in the subtext of tomorrow's payrolls report (following The Fed Minutes' comments on full employment), Goldman Sachs is forecasting a better-than-expected 0.3% rebound in average hourly earnings (helped by more favorable calendar effects) and a better-than-expected 180k payrolls print (albeit with a small rise in the unemployment rate). However, they are careful to note that any downside can be blamed on “a considerable drop in temperatures.”
As Goldman Sachs details:
We forecast that nonfarm payroll employment increased 180k in December, after an increase of 178k in November and 142k in October. On balance, labor market indicators were moderately strong in December, with improvement in the employment components of many service-sector and manufacturing surveys and a rise in consumer confidence to a 15-year high. The key labor market subcomponent of consumer confidence also hovered near its post-crisis high, despite a modest pullback from November. We also expect above-trend payroll growth in the transportation and warehousing industry, driven by elevated hiring related to strong online holiday shopping. On the negative side, initial jobless claims drifted higher and continuing claims posted the largest survey-week-to-survey-week increase in nearly a year. December’s relatively cold payroll survey week could also constrain payroll growth in weather-sensitive industries such as construction, particularly after the warmer-than-usual November.
We do not expect the end of the election to be a major factor this month. If election-related uncertainty reduced or delayed hiring plans earlier in 2016, the end of the election could potentially catalyze a reacceleration in hiring, as we’ve documented in research studying past elections. However, the reacceleration historically tends to occur over several quarters, and perhaps more importantly, we would not characterize the post-election landscape as one of reduced uncertainty. We will study the industry composition of tomorrow’s reports for signs of an impact from the election, such as above-trend growth in energy or financial services, or below-trend growth in healthcare or import-reliant subindustries.
Arguing for a stronger report:
- Service sector surveys. Most of the employment components of service sector surveys improved or remained at encouraging levels in December. The Philly Fed non-manufacturing employment index rose most dramatically to an 18-month high (+5.4pt to +19.7), and the New York Fed index increased to a 9-month high (+1pt to +12.0, SA by GS). The ISM non-manufacturing employment component was disappointing, falling to 53.8 from 58.2, but remains at a level consistent with moderate growth in service-sector employment. Meanwhile, the Richmond Fed (-1pt to +12.0) and Dallas Fed (-1.4pt to +7.8) measures pulled back modestly to levels also consistent with expansion. Service sector payroll employment increased 139k in November and has increased 177k on average over the last six months.
- Manufacturing sector surveys. The employment components of manufacturing surveys were somewhat stronger in December. The ISM manufacturing employment component rose to an 18-month high (+0.8pt to 53.1), and the Philly Fed (+9.0pt to +6.4) and Kansas City Fed (+9pt to +10) employment components both improved sharply. On the negative side, the Dallas Fed (-7.4pt to -2.9), Richmond Fed (-6pt …read more
Source: Payrolls Preview: Blame Weakness On Weather, Strength On Trump
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