US jobs report preview

From Goldman:

We estimate that nonfarm payrolls increased 225k in November, above consensus of +195k. In addition to a firm pace of underlying job growth, our forecast reflects some additional normalization in hurricane-affected regions, as well as above-trend retail job growth associated with the early Thanksgiving. The arrival of over 200k Puerto Ricans in Florida may also boost payroll growth this month.

We estimate the unemployment rate remained unchanged at 4.1%, as the brisk downtrend in recent months seems due a pause. For average hourly earnings, we estimate +0.3% month-over-month (+2.7% yoy) with risks skewed to the upside, reflecting a boost from unwinding hurricane distortions and somewhat favorable calendar effects.
emphasis added

BofAML:

We forecast that nonfarm payrolls increased by an above-trend 210k in November. While nonfarm payrolls rebounded … in October, it was well short of offsetting the decline seen in September and therefore we expect a further rebound in job growth in November. … Elsewhere, we expect the unemployment rate to tick up to 4.2% from 4.1%. The unemployment rate declined in October as the labor force participation rate and household employment dropped sharply, potentially due to noise in the household survey. On wages, with labor market conditions continuing to tighten, we look for average hourly earnings growth to rebound to 0.3% mom in November after a flat reading in October. If realized, the yoy rate should jump to 2.7% from 2.4%, previously.

And Calculated Risk:

The consensus, according to Bloomberg, is for an increase of 190,000 non-farm payroll jobs in November (with a range of estimates between 153,000 to 250,000), and for the unemployment rate to be unchanged at 4.1%.

The BLS reported 261,000 jobs added in October.

Here is a summary of recent data:

• The ADP employment report showed an increase of 190,000 private sector payroll jobs in November. This was above consensus expectations of 186,000 private sector payroll jobs added. The ADP report hasn’t been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth close to or above expectations.

• The ISM manufacturing employment index decreased in November to 59.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll increased about 34,000 in October. The ADP report indicated manufacturing jobs increased 40,000 in November.

The ISM non-manufacturing employment index decreased in November to 55.3%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 215,000 in November.

Combined, the ISM indexes suggests employment gains of about 249,000. This suggests employment growth above expectations.

• Initial weekly unemployment claims averaged 241,500 in November, up from 232,000 in October. For the BLS reference week (includes the 12th of the month), initial claims were at 240,000, up from 223,000 during the reference week in October.

The increase during the reference week suggests a weaker employment report in November than in October.

• The final November University of Michigan consumer sentiment index decreased to 98.5 from the October reading of 10000.7. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and politics.

• Conclusion: The ISM reports suggest a strong report. The ADP report and weekly claims suggest a an employment report close to expectations. My guess is the employment report will be above the consensus.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.