US: Expect an increase of 165k in nonfarm payrolls - Nomura

Analysts at Nomura expect an increase of 165k in nonfarm payrolls (Consensus: 178k) with 160k from the private sector (Consensus: 169k) and 5k from the government in June.

Key Quotes

“For manufacturing sector employment, we expect an increase of 10k (Consensus: 5k). Payroll employment growth has been trending lower in recent months. In December through February, payroll gains averaged 201k. Between March and May, growth slowed to an average of 122k. However, incoming data suggest continued strength in the labor market. Some survey employment indicators are still at high levels despite some moderation. In particular, the Empire State manufacturing employment index ticked down to 16.1 in June from 17.3 in May, and the Philly Fed employment index fell to 27.6 in June from 38.8 in May. However, both still remain in healthy territory. In addition, initial jobless and continuing claims remained low in June, suggesting healthy employment gains in the month.”

“Moreover, we expect the unemployment rate to be unchanged at 4.3% in June (Consensus: 4.3%). Last month’s payroll gain of 138k, while below consensus, was still above the level needed to absorb growth in the working-age population. Yet, as more previously discouraged job seekers re-enter the labor force, we may see a slight uptick in the labor force participation rate. Further, the unemployment rate for workers with less than a high school degree dropped sharply, contributing to some of the decline in the headline reading. As this series is somewhat noisy, there could be a moderate rebound in June.”

“Reflecting continued labor market tightness, we expect a healthy 0.3% m-o-m (2.69%  y-o-y) increase in average hourly earnings (Consensus: 0.3%). A recent pick-up in the growth rate of aggregate hours, outpacing that of aggregate earnings, has caused a slight deceleration in average hourly earnings growth. However, given healthy employment gains in recent months and a low unemployment rate, earnings growth will likely pick up slightly.”