Preview: April NFP: BofA, Barclays, Credit Agricole, DB, SEB

BofA: Nonfarm payroll growth likely posted a solid 200,000 in April, driven once more by service-providing firms. Of this, government hiring likely contributed 5,000, which is a more modest clip than the 20,000 pop in March. We find support to our outlook from the push lower in jobless claims and improvement in the Conference Board’s labor market differential measure. There may be a payback in manufacturing jobs after two sizeable declines in February and March, but the early manufacturing survey data have been mixed. Housing starts have recently slowed, which could lead to a slower pace of construction hiring. We also expect continued contraction in mining jobs.

We look for the unemployment rate to hold at 5.0%, assuming the participation rate holds steady. However, there is a risk it heads higher, following the recent trend, which could boost the unemployment rate. The participation rate has seen an impressive recovery since September of last year, rising to 63% from 62.4%. A robust labor market has attracted many workers back into the labor market, and it is more likely than not that this trend generally continues in the near term. However, increased labor supply also means delayed wage pressures: we are looking for only 0.2% monthly growth in average hourly earnings. This would leave the yoy growth rate unchanged at 2.3%, though this is still greater than the 2% pace seen earlier in this cycle. Average weekly hours should tick up to 34.5 from 34.4.

We recommend being tactically bullish the dollar ahead payrolls. The solid employment report we expect (NFP +190k) will leave the 6mma average at a healthy 224,000 evidence of continued labor market tightening. We expect wages to rise a healthy 0.2%, leaving the y/y change stable at 2.3%. Stability is not great but better than deceleration, which amidst a generally improving trend in wages is enough to keep the Fed on track for a June hike.

Barclays: For the April employment report, scheduled for release on Friday, May 6, we forecast nonfarm payroll growth of 250k. Such an outturn would indicate that job growth accelerated from the March reading of 215k and the 209k average in Q1. Within this, we look for private payroll growth of 240k and net government hiring of 10k. Supporting our outlook for solid employment gains are initial jobless claims, which fell in the April survey week relative to March, and continuing claims, which also moved lower on the month. Trends in initial and continuing jobless claims point to ongoing declines in labor market separations, and we are allowing the full signal from the claims data to pass into our forecast for April employment.

Elsewhere in the report, we forecast average hourly earnings to rise 0.3% m/m and 2.4% y/y in April. In line with our view that US labor markets remain healthy, we expect the average workweek to hold steady at 34.5 hours.

We look for the household survey to show a similar pace of job growth as the establishment survey, leading the unemployment rate to decline one-tenth, to 4.9%. Striking workers are generally included in the household survey under the category “with a job, but not at work.” Labor force participation has risen 0.6pp since September, limiting the magnitude of the decline in the unemployment rate. We expect participation to trend broadly sideways from its current reading of 63.0% and look for the near-term evolution of the unemployment to reflect employment gains more closely.

 

Credit Agricole: We expect April nonfarm payrolls to rise by 190K vs. 215K in March...The April unemployment rate may decline marginally but is likely round to 5.0% rather than 4.9%

Given a sustained recovery in global financial conditions, we expect the data to come in stronger and Fed commentary to sound more constructive.

DB: After the April ADP figure, the market is likely pricing in a NFP number toward the bottom of the 160K – 315K economist range, i.e. a number broadly in line with DB’s 175K forecast.

A 200K type NFP number would then be mildly USD positive. It would work with thoughts that recent USD weakness has overshot.A favored rebuild in long USD exposure is versus the commodity currencies notably AUD (a trade helped by valuation considerations) and CAD (given sensitivity to Fed policy).

In contrast, a weaker payroll number in the 100k - 125K range would seriously dent expectations of a rate hike before the US election and would encourage very selective short USD exposure, of which short USD/JPY is preferred, not least because this trade would also stand up to even softer numbers and more elevated global growth concerns.

A genuinely weak sub-100K number would probably be USD negative only versus the JPY and perhaps CHF and EUR, as growth-dependent commodity currencies and EM would likely seriously underperform on fears of another significant down step in global growth, against a backdrop of reduced policy efficacy.

SEB: Our indicator model is suggesting a 180k advance in total employment growth which is our forecast. Given that the participation rate holds steady, the unemployment rate should decrease to 4.9%. With respect to wage growth, we are looking for another 0.3% reading.

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