Nonfarm Payrolls Preview: Blame Weakness On Weather, Strength On Trump
By Tyler Durden
Here's what to expect in a nutshell:
- US Change in Nonfarm Payrolls (Dec) M/M Exp. 178K (Prey. 178K, Oct. 161K)
- US Unemployment Rate (Dec) M/M Exp. 4.70% (Prey. 4.60%, Oct. 4.90%)
- US Average Hourly Earnings (Dec) M/M Exp. 0.30% (Prey. -0.10%, Oct. 0.40%)
Last month's Non-farm payrolls saw an increase of 178k jobs, however, the month was highlighted by the Fed supported by wide consensus, to hike by 25bps in December. The US unemployment rate saw a figure of 4.60%, significantly lower than October's figure and printing the lowest unemployment rate seen since early 2008 but is worth bearing seasonal factors in mind. The noticeable disappointment in November's figures was the US average hourly earnings metric M/M (-0.10%) and many will be keeping an eye on these figures to see if expectations are correct and this was indeed an anomaly.
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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 …read more
Source: Nonfarm Payrolls Preview: Blame Weakness On Weather, Strength On Trump
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