US NFP Preview: 12 major banks expectations from the July release

We are closing in on the July’s release of US Non-Farm Payrolls data. The following are the expectations as forecasted by the economists and researchers of 12 major banks.

Nonfarm payroll volatility has been elevated of late and following two extreme reads (May to the low side and June to the high side), all the 12 major banks suggests that the July NFP is likely to print a number in between 120K to 210K while the unemployment rate is likely to hover in between 4.8-4.9% range.

ING

After recent volatile jobs numbers, we look for a return closer to trend. Last month’s bumper 265k non-farm payrolls (NFP) figure underscored Chair Yellen’s (and our own) view that the dip in employment growth during April/May was just a blip. Volatile data makes the underlying NFP trend tricky to gauge, but we think a return to 160-190k would be trend-consistent. That said, a 120k-plus figure is sufficient, given that job creation is slowing as the final labour market slack erodes. Unemployment rate could fall back to 4.8% – but watch the underlying drivers. Base effects mean that our 0.3% MoM wage growth forecast will keep the YoY comparison unchanged at 2.6%.

Societe Generale

After the least volatile era in the payroll series in over 50 years, the monthly data have been winging around of late and the task now is to guess/judge where the underlying trend actually is. Our US economics team is looking for a 140k gain this month, in line with this year’s average rather than the longer-term 204k trend. The market’s at 180k, with unemployment down to 4.8% from 4.9%, and wage growth steady at 2.6% y/y.

Nomura

We expect the Bureau of Labor Statistics to report on Friday that nonfarm payrolls gained an additional 170k workers in July (Consensus: 180k). To this end, we expect the unemployment rate, on a rounded basis, to be unchanged at 4.9% in July (Consensus: 4.8%). Elsewhere, we expect average hourly earnings to rebound by 0.30% m-o-m (2.6% y-o-y) in July (Consensus: 0.2% m-o-m, 2.6% y-o-y) following a weaker-than-expected 0.1% mo-m increase in June.

RBS

May’s dismal employment gain (+11,000) was followed by an explosive advance (+287,000) in June. Looking through the month-to-month swing, the hiring trend has cooled somewhat. In Q2, payroll changes averaged 147,000 versus 196,000 in Q1 and 229,000 in all of 2015. The slowing may reflect restraints on supply (a lack of qualified workers) rather than weak demand. In any case, such a slowing would not be uncommon at this late point in the economic cycle. That said, we look for another relatively strong job gain in July, with nonfarm payrolls forecast to have advanced by 195,000. Away from payrolls, we look for the average workweek to have held steady for a sixth straight month in July at 34.4 hours. Combined with our expected private payroll advance, this would imply a rise in the index of aggregate hours worked of 0.2%. On the wage front, we expect a relatively firm reading, in part due to the calendar quirk (since the 15th of the month falls in the survey week, increases in bi-monthly pay are more likely to have been captured). In July, we look for average hourly earnings to have risen by 0.3%, which is likely to have left the year/year rate steady at 2.6%. Finally, after sliding in May from 5.0% to 4.7%, the unemployment rate reversed in June to 4.9% (4.899% unrounded). In July, we look for the jobless rate to have been unchanged at 4.9%, with moderate gains recorded in both the labor force and the number of people employed.

Scotiabank

Nonfarm payrolls data for July should show a healthy improvement in jobs, and we’re forecasting a 210k print on the month. The main driver of our model is trend reversion. Even as June brought a large gain in non-farm payrolls, it only somewhat made up for a very soft spell mid-year. We think that the trend in payrolls is above 200k, and we think that nonfarm payrolls thus still have some trend-reverting to do. Coincident indicators point to the same as initial jobless claims were quite low on the month, averaging 254k claims, which is extremely subdued, during the first two full weeks of the month.

Commerzbank

We expect payroll gains of 190k for July (consensus: 178k) and a one-tenth decline in the unemployment rate to 4.8% (consensus: 4.8%). As for average hourly wages, we expect an above-average increase by 0.3% on the month (consensus: 0.2%), though like the modest increase in June this would be due to calendar effects. The year-on-year rate would thus remain at 2.6%, but with the trend still pointing slightly upwards. All in all, the data would therefore provide further evidence supporting the view that the weak May report was an outlier.

Rabobank

Today we will focus on the US payrolls report. The headline number is seen rising by a healthy 180K, but average earnings are seen up just 2.6% y-o-y – that’s yet another structural issue that monetary policy can’t change, apparently. Apart from that we will also have Canadian employment and the US trade balance to look at.

MUFG

Our internal model estimate for today’s nonfarm payroll print for July is 214k – so above the consensus in the market, which Bloomberg has at 180k. A figure around consensus or our estimate would confirm that the 11k print in May was a one-off and that the true trend in job gains is perhaps coming down, but still something between 150K-200K.

Wells Fargo

Beyond the volatility of the past two months, however, the trend in payroll growth is moderating. Employers added an average of 171,000 jobs in the first half of 2016, about 50,000 fewer than the same period last year. The low level of initial jobless claims and favorable employment readings from regional Fed surveys suggest employment growth rose around 190,000 in July. That should be sufficient to reduce the unemployment rate to 4.8 percent after last month’s curiously large rise in the number of unemployed workers.

RBC CM

Nonfarm payroll volatility has been elevated of late and we think that, following two extreme reads (May to the low side and June to the high side), NFP will come in closer to the true underlying trend near 175k. Note that this pace is well above the breakeven pace needed to keep the unemployment rate steady, and we anticipate an improvement in that metric to 4.8% on the month as well. With jobless claims near all-time lows and job openings near all-time highs, the pipeline of employment looks robust near-term.

BBH

The median guesstimate is for an increase of around 175k, which is above the three and six-month averages (147k and 172k respectively).  The unemployment rate may tick down to 4.8%.  Average hourly earnings need to increase by 0.2% to maintain the 2.6% year-over-year pace.

TDS

The pace of job growth is expected to normalize in July following the massive +287k nonfarm print in June. TD looks for the addition of +188k jobs, slightly above the +180k consensus while rising labour force participation should hold the unemployment rate unchanged at 4.9%, above the consensus for a decline to 4.8%.

Click here to read more about the NFP preview from our Chief Analyst Valeria Bednarik titled “Nonfarm Payrolls Preview: so what?”

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