Nonfarm payrolls to increase by 160k - Nomura

Analysts at Nomura explained that they expect the Bureau of Labor Statistics to report that nonfarm payrolls increased by 160k workers in September. 

Key Quotes:

"We forecast that 5k workers were added in the public sector, implying that private payrolls increased by 155k. If our private payrolls forecast is realized, it would suggest a modest reacceleration in growth in employment in the private sector but a weaker pace of hiring activity compared with June and July.

Our tracking model forecasts a strong increase of 214k in private payrolls in September. However, given some of the sub-models’ heavy reliance on unemployment insurance claims data, which have been at historically low levels, we are somewhat hesitant to take the forecast at face value. Although historically initial and continuing claims have had a strong statistical relationship with changes in private payrolls—low levels of claims don’t necessarily imply more job creation, just fewer involuntary separations. 

Other data on the labor market and business activity imply somewhat more modest job growth in September. Therefore, we think that the models are giving a read on employment growth in September that is too optimistic.

Elsewhere, we expect average hourly earnings to grow by 0.20% m-o-m (2.6% y-o-y) in September following a 0.1% m-o-m increase in August. We do not expect a strong
rebound in wage growth, as the calendar effect (i.e., the number of working days during the BLS survey period) appears unfavorable for workers who are paid bi-monthly. Last, we expect the unemployment rate to remain unchanged at 4.9%."