US: Nonfarm payroll employment to increase strongly by 180k in November - Nomura

Analysts at Nomura expect US nonfarm payroll employment to increase strongly by 180k in November, reaffirming continued labor market strength.

Key Quotes

“Out of our +180k forecast, we expect the private sector to contribute 175k and government payroll employment to add 5k. In October, nonfarm payroll employment increased sharply by 261k, reflecting strong rebounds in sectors that were affected by the hurricanes in September. For November, incoming data point to continued strength in the labor market. Employment indicators in various business surveys remained elevated.”

“In particular, the employees index of the Philly Fed survey registered 22.6. Although lower than October, this points to heathy hiring activity in the region. Further, the Conference Board’s labor market differential index reached 20.2 in November, up from an already-elevated 19.6 in October, suggesting favorable labor market conditions for job seekers. Additionally, we expect the manufacturing sector to add a healthy 20k jobs in November, which would be consistent with sustained momentum in the manufacturing and industrial sectors.”

“We expect the unemployment rate to inch down to 4.0%, consistent with the strong pace of job creation. The labor force participation rate fell by 0.4pp to 62.7% in October, from an elevated 63.1% in September, driven by a sharp and peculiar increase in the flow of workers from employed to nonparticipation. We expect some of these nonparticipants to rejoin the labor market, but we do not think a possible rebound in the labor force participation rate will be enough to push up the unemployment rate in November.”

“For average hourly earnings (AHE), we expect a healthy increase of 0.26% m-o-m in November, which translates to a 2.66% y-o-y rate, up from 2.43% in October. In October, AHE declined by 0.04% m-o-m. Some of the downside surprise in October can be attributed to a strong rebound in aggregate hours worked in specific hurricane-affected industries (construction and leisure & hospitality). As these series return to their means, we expect AHE to revert to trend levels.”