US nonfarm payrolls to advance by 175k in November - TDS

Analysts at TDS expect US nonfarm payrolls to advance by 175k in November as data on persons not at work due to bad weather suggest that hurricane impacts should have faded by this month, allowing payrolls to print closer to their current trend in the 150-200k range.

Key Quotes

“Upward revisions to the prior two months are also likely. Meanwhile, labor market indicators (ISM, regional Fed surveys, and consumer confidence) remained supportive of solid job gains in November. We lean toward a print below 200k, consistent with the slowing trend in job growth and the level of labor market tightness.”

“We expect the unemployment rate to tick higher to 4.2% from 4.1%, given the outsized decline in labor force participation that has the potential to correct. We also look for a relatively modest 0.2% m/m increase in average hourly earnings, as calendar effects are less favorable this month. That should leave earnings tracking higher on a y/y basis at 2.6% vs 2.4%, though likely to the disappointment of markets with consensus calling for a 2.7% pace.”

“Foreign Exchange

• The dollar comes into the November NFP release on a hot streak, recouping nearly half the move from the October highs. While the move is likely rooted in the rise of USD funding costs, we believe the November NFP release will act a crucial near-term pivot point. This reflects the offsetting factors driving the G10 space at the moment, with the dollar pricing in a lot of the good risks like tax policy, data momentum, and a Dec Fed hike. The negatives include political uncertainty, the potential for a government shutdown, and risk that the tax plan doesn’t get inked until next year.
• This leaves the data to set the tone and we look for a miss on both headline job growth and wages. A 1.5-sigma miss on wages has been worth around a 0.4% knee-jerk drop in the BDXY, which has also translated into further declines in the subsequent six days. A double-whammy of weaker job growth and softer wages could, in turn, stall the rally in the greenback, especially since the recent string of good data has been one of its crucial levels of support.”