US NFP preview - Nomura

Another round of the US Non-Farm Payrolls drops this Friday at 12:30 GMT and broader markets are expected an uptick over the previous month, and Nomura analysts are calling for a better-than-expected reading as they expect the strong reporting trend to continue into August.

"Consensus expectations:

• Headline change expected +198K, prior +157K
• Unemployment rate expected 3.8%, prior 3.9%
• Average hourly earnings expected +0.2% m/m, prior +0.3%
• Average hourly earnings expected +2.7% y/y, prior +2.7%

After a 157k gain in nonfarm payroll employment in July, a somewhat stronger report than the headline reading suggests, we expect a solid 215k increase in NFP employment in August.  Part of the below-forecast reading for July was attributable to unusual declines in certain industries that could revert in August.

A 220k NFP gain in August would be consistent with economic growth of roughly 3%. However, despite forecasting a solid 20k gain in manufacturer employment in August, we see some downside risk to the near- to medium-term employment growth outlook if manufacturing growth slows materially due to trade concerns. With a modestly negative bias due to calendar effects, we expect average hourly earnings (AHE) to increase by 0.18% m-o-m in August, corresponding to 2.69% y-o-y. Consistent with strong employment growth, we expect the unemployment rate to fall 0.1pp to 3.8% in August and see room for a possibly larger decline in light of a possible drop in LFPR."