What To Expect From NFP? - Views From 10 Major Banks

What To Expect From NFP? - Views From 10 Major Banks

4 November 2016, 10:16
Vasilii Apostolidi

Employment Report, October - 8:30am 

Goldman Sachs: The week ends with the October US employment report, which we expect to show that the US economy added 185kjobs last month, 4.9% on the unemployment rate and 0.3% on average hourly earnings.

BofA Merrill: We look for nonfarm payroll growth of 170,000 in October, in line with the recent 6- month trend and up from 156,000 in September. We expect private payroll growth to have constituted 165,000 of this gain with a modest 5,000 gain in government payrolls. Our equity analysts have only seen mixed signals related to holiday hiring so far, but there have been some news reports of stronger seasonal hiring, presenting upside risk to our forecast. The underlying rate of job growth should remain robust based on our forecast for October and especially given the possibility of an upward revision to September jobs. As we argued in Nonfarm payrolls myths and realities, there tends to be a pattern of upward revisions to September in the order of about 30,000 jobs. We expect the unemployment rate to remain unchanged at 5.0% with the labor force participation rate holding at 62.9%. The labor force participation rate will be an important indicator to watch given the 0.1pp increase last month. We expect a trend-like 0.2% mom gain in average hourly earnings, leaving the year-over-year rate to fall to 2.5% from 2.6%, and we think average weekly hours will remain unchanged at 34.4.

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Barclays: we look for nonfarm payrolls to rise by 175k. We expect 165k of these gains to come from the private sector – in particular, service-providing employers – with government payrolls adding the remaining 10k. Elsewhere in the report, we expect the unemployment rate to decline by one-tenth, to 4.9%, average hourly earnings to rise by 0.3% m/m and 2.6% y/y, and the average workweek to remain unchanged at 34.4 hours. On balance, overall job growth of 175k would confirm ongoing strength in the labor market. The increase in payrolls, combined with the ongoing improvement in wages, should boost household income and keep consumption on track. We also believe at these numbers employment growth is sufficient to keep the Fed on track for a December rate hike.

SEB: Our forecasts are for 190k on the headline, 185k on private payrolls, 4.9% on the unemployment rate and 0.2% on average hourly earnings. 

UBS: Private payrolls probably accelerated modestly to 175k in October, but we project headline payrolls (160k est) depressed by further payback for exaggerated education payrolls in earlier months. For private payrolls, we are assuming some lessening of factory sector weakness as temp hiring picked up in September and the ISM employment index is inching toward neutral. Average hourly earnings probably rose 0.2%m/m—on trend, and we forecast a flat workweek after last month's increase. For the unemployment rate, the result will likely be a decline to 4.9% from 5.0% although yet another rise in the participation rate is a believable alternative.

Credit Agricole: Our estimate is for a 185K rise for October nonfarm payrolls and a decline in the unemployment rate to 4.9%. Payroll forecasts center on a range of +160K to +200k with the median at 175K. The economic release calendar leaves us with less employment-related data than normal upon which to base our forecast. Regional manufacturing reports suggest stronger manufacturing hiring in October. The Kansas City and Richmond Fed surveys both accelerated while the Empire and Philly Fed surveys were each up but still negative. Although initial claims for unemployment insurance increased by 10K between reference weeks, we believe some of that to be a result of Hurricane Matthew rather than a real underlying trend. Matthew also likely depressed construction hiring in October.

BNPP: We expect a solid 180k increase in non-farm payrolls to be reported Friday, leaving the three month average of jobs creation running at 168k.

CIBC: A gain of 160K in non-farm payrolls might seem like a disappointment relative to the above 200K pace seen over the past couple of years, but it’s actually quite a healthy number. The economy only needs to create roughly 100K jobs per month to keep up with demographics. As a result, October’s print will still represent solid progress towards the Fed’s goal of full employment. If, as expected, labour force participation takes a step back after a solid gain last month, the increase in employment should result in a two tick drop in the unemployment rate to 4.8%. Wages will also continue to show progress, gaining 0.2% on the month. Overall, the employment report should add to expectations of a rate hike from the Federal Reserve in December.

Morgan Stanley: Should our economists' projection of an October US payroll gain of 205k prove correct, thus exceeding the 175k consensus expectation by a wide margin, then USDJPY should receive another boost, inspired by steeper US yield curve.

Nomura: We forecast that the Bureau of Labor Statistics will report on Friday that nonfarm payrolls increased by 170k in October. We expect no change in payrolls in the public sector, implying that private payrolls increased by 170k (Figure 1). Incoming data suggest that the economic momentum gained in September likely continued into October and the early data releases of employment indicators for October and the general trend over the past few months suggest no major change in labor market conditions. If our forecasts prove true, it would imply job gains remain steady and should continue to put downward pressure on the unemployment rate (we expect the unemployment rate to decline to 4.9% from 5.0%).

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