Preview of the employment report - Nomura

Analysts at Nomura offered a preview of the employment report.

Key Quotes:

"We forecast that nonfarm payrolls increased by 160k in November, comparable with the gains seen in October. 

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, the ADP employment report showed that private payrolls grew by 216k in November, well above market expectations (Nomura: 155k, Consensus: 170k). 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, 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."