US NFP Preview: Expect a gain of 160k in November - Nomura

Research Team at Nomura, is forecasting that the US nonfarm payrolls increased by 160k in November, comparable with the gains seen in October.

Key Quotes

“We expect a modest rise of 5k in government payrolls, implying that private payrolls increased by 155k. Incoming data on the labor market, for the most part, imply steady employment activity with limited involuntary layoffs in November.”

“We see some upside risk to our below-consensus forecast from two sources. First, ADP employment report showed that private payrolls grew by 216k in November, well above market expectations (Nomura: 155k, Consensus: 170k). We note that some of the outsized gains could be some positive payback after the reported job growth in October was revised down to 119k from 147k. Nevertheless, the strong ADP employment figure could portend to a better-than-expected nonfarm payrolls number on Friday.” 

“Second, in the past, the payrolls figures have suffered from residual seasonality during the holiday period. With more consumers opting to do their holiday shopping online rather than at brick-and-mortar stores seasonal hiring patterns have been much more pronounced in the couriers and delivery service sector. Residual seasonality has been diminishing as the seasonal adjustment process has responded to the new pattern. However, we still find some residual seasonality in the data and we may still see some upward bias in November and December.”

“Elsewhere, with the pace of job gains holding steady and further declines in the insured unemployment rate (continued jobless insurance claimants divided by covered employment), we expect the unemployment rate to decline further to 4.8% in November. On wages, we expect growth in average hourly earnings to slow to 0.1% m-o-m (2.7% y-o-y) following a sharp increase of 0.4% m-o-m in the previous month. We think that the prior month’s strong wage growth was artificially amplified by inclement weather holding down the average weekly hours worked during the survey reference period. To that end, we think that some payback is warranted in November as conditions returned back to normal.”