What To Expect From NonFarm Payrolls? - Views From 17 Major Banks

The following are the expectations for today's US May jobs report as provided by the economists at 17 major banks along with some thoughts on the USD into the data release as provided by the FX strategists at these banks.

Goldman Sachs: Change in Nonfarm Payrolls (May): 210K, Unemployment Rate (May): 5.4%, Average Hourly Earnings YoY (May): 0.3%.

Deutsche Bank: Change in Nonfarm Payrolls (May): 275K, Unemployment Rate (May): 5.4%, Average Hourly Earnings YoY (May): 0.2%.

SEB: Change in Nonfarm Payrolls (May): 230K, Unemployment Rate (May): 5.3%, Average Hourly Earnings YoY (May): 0.2%.

CIBC: Change in Nonfarm Payrolls (May): 200K, Unemployment Rate (May): 5.3%, Average Hourly Earnings YoY (May): 0.3%.

SocGen: Change in Nonfarm Payrolls (May): 227K, Unemployment Rate (May): 5.3%, Average Hourly Earnings YoY (May): 0.3%.

Wesptac: Change in Nonfarm Payrolls (May): 225K, Unemployment Rate (May): 5.4%.

Morgan Stanley: The focus is likely to switch back to global events and the US in particular today with the release of the US nonfarm payroll data. The market is likely looking for another robust report, given the strong readings from other employment surveys, including the ADP, Challenger and the continued historically low readings of initial claims. This points to a strong labour market report, where the market consensus is for a 226k reading (MS: 215k). Given recent reductions in positioning, where USD longs have been scaled back, we would see potential for USD to rally today if the markets’ assumption of a strong reading is seen.

RBS: RBS Trading Desk Economics forecast non-farm payroll growth of 245K in May, above 226K consensus. They expect average hourly earnings growth to rise from 2.2% to 2.3% y/y. While still below levels Fed Chair Yellen considers normal, a 2.3% y/y rise in average hourly earnings would match the largest y/y increase since 2009. They expect the unemployment rate to hold steady at 5.4%. FX View: Stronger-than-expected employment should keep the Fed on pace to hike the Fed Funds rate in September, and pulling forward of expectations could support the USD. A stronger USD and pulled-forward rate hike expectations could pressure commodity prices and weigh on commodity exporter currencies. The quick re-acceleration of the EUR positioning squeeze in recent days suggests EUR short positions remain entrenched, and the EUR, could be an outperformer if weak payrolls puts the US economic and monetary policy divergence narrative under pressure. With officials suggesting they are keeping an eye on FX developments in Japan, JPY may strengthen on weak payrolls as well.

Credit Suisse: Non-farm payrolls are expected to remain around the levels seen last month. We project +220K jobs added (consensus: +225K), 3K less than April’s print. With respect to unemployment, we forecast a 5.4% rate (consensus: 5.4%), unchanged from the prior month. Hourly earnings are expected to rise from the below-trend reading last month to +0.3% (consensus: +0.2%).

BNPP: Our economists expect a strong 240k gain in today’s payrolls, a reasonably solid 0.2% gain in earnings, and the jobless rate holding steady at last month’s 5.4% cycle low. Numbers in line with this forecast should be consistent with at least some shift forward in Fed rate hike expectations towards the September meeting and help the USD extend gains vs. the JPY and most other currencies. EURUSD price action might be more complicated on a strong release, with the EUR’s recent sensitivity to developments in long-end yields suggesting caution in the immediate aftermath of a strong US report. If, on the other hand, payroll growth were to disappoint, we could see renewed capitulation on long USD positions, particularly vs. higher yielding currencies, as markets continue to lose confidence in the Fed’s capacity to hike rates this year.

Credit Agricole: The key event this week is today’s May NFP release. CACIB is below market consensus, expecting a 210k rise vs. market consensus of 225k. The standard deviation of forecasters is 25k so our outlook still sits above a one-standard deviation miss. Still, the recent tone of economic data supports an upbeat view on payrolls...The upshot is that we think a solid payrolls number should provide fresh tailwinds to the greenback in spite of the recent pullback against the EUR. Indeed, while the EUR has rallied 2.4% against the USD this week, the USD has traded firm against most major and EM currencies. Notably, in trade weighted terms the USD rose 1.0% from over a week ago. We also think the movements in German bunds and hopes of a compromise between Greece and its creditors have also supported the EUR. In our view this owes largely to temporary factors such as a market positioning and liquidity rather than fundamentals. Finally, we also think the gradually improving data backdrop should see Fed speakers shift back to more hawkish language. Linked to this, we think the Fed’s bar to hike is low but appetite to hike is strong, which supports our short-term upbeat view on the USD, especially against EUR, JPY and CHF.

Barclays: We are looking for a 225k headline print, broadly in line with the consensus forecast of 228k. Furthermore, we expect the tightening in labor markets to continue with the unemployment rate declining to 5.3% (consensus: 5.4%) and average hourly earnings rising 0.2% m/m (consensus: 0.2% m/m).

BofA Merrill: We look for a solid jobs report with nonfarm payroll growth of 220,000 and the unemployment rate holding at 5.4% in May. This would imply a modest pickup from the 3-month average of 191,000 but slightly softer than the 6-month trend of 255,000. The labor market was exceptionally strong at the end of last year with job growth averaging 324,000 a month in 4Q14, running at a pace that was nearly three times the rate needed to keep up with labor force growth. Some cooling in the pace of job growth was therefore to be expected. Looking ahead, we expect job growth of approximately 200,000 a month, which would imply a healthy improvement in the labor market.

Danske: We forecast +200k new jobs to have been added in May (as indicated by the ADP report), which is also the consensus expectation. Manufacturing is likely to remain the weak spot with the service sector the main driver of job growth. Average hourly earnings is likely to get a lot of investor attention, as a rebound from last month and any indication of a more clear upward trend in wage inflation would help convince the dovish FOMC members that a 2015 rate hike is warranted.

BTMU: All the data available points to confirmation in today’s non-farm payroll report that the US labour market is booming. Yesterday, the initial claims data dropped back again and remained consistent with strength not seen since 2000. The NFIB data on the labour market for the May report was also released and again pointed to a strengthening jobs market. The Plans to Hire index ticked back higher from 11 to 12, consistent with the 6-month average after the dip in March. The 6-month average of non-farm payroll gains currently stands at 255k. That’s a touch stronger than what Is consistent with ADP reading of 201k on Wednesday when the average discrepancy between the two readings is assumed to have remained constant and an average government job gain is added. Our own internal non-farm payrolls model estimates a gain of 240k today. That level of gain may well be enough to see the unemployment rate drift further lower. If we get a 5.3% print today that would leave the unemployment rate just 0.1ppt above the top of the FOMC’s estimated range for where the rate is expected to average in Q4.

Nomura: We expect the Bureau of Labor Statistics (BLS) to announce on Friday, 5 June, that a net new 190k jobs were added to US nonfarm payrolls in May. Our forecast is below the 223k jobs added in April and the Consensus expectation of 227k. The unemployment rate declined only slightly in April to 5.443% (5.4%), from 5.465% (5.5%) in March, as household employment rose by 192k and the number of unemployed persons declined by 26k. We believe the May employment rate remained at 5.4% in May and expect the decline in the rate to be slower as we approach the upper bound of the FOMC’s long-run forecast for the unemployment rate, at 5.2%.

UBS: UBS projects a 205K rise in payrolls and a further 0.1% decline in unemployment, in line with fairly positive assessments of labour market trends.

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