Nondarm payrolls preview - Nomura

Analysts at Nomura offered a preview for the jobs report today in the U.S. session.

Key Quotes:

"Labor market indicators from business surveys have been generally steady for May. But it appears that hiring activity has ratcheted down in recent months. Our analysis suggests job growth should slow in coming quarters, as we expect labor productivity to recover modestly and growth to trend closer to potential. Read more: US: Labor Market Outlook Update, Special Report, 26 May 2016. We expect the Bureau of Labor Statistics (BLS) to report that US nonfarm payrolls increased by a net 175k jobs in May (consensus: 160k), a modest step up from the prior month when nonfarm payrolls gained 160k workers. 

We have revised up our forecast modestly, by 15k, from our original estimate of 160k, as the May ADP private payrolls employment report showed that private payrolls added 173k workers, a bit stronger than our forecast for 155k. Similarly, we revised up our private payroll forecast by the same magnitude, to 170k (consensus: 150k) from 155k. 

Given the lackluster manufacturing activity data over the month, we forecast that manufacturing payrolls declined by 10k (consensus: -2k) in May. Our forecast takes into account the recent BLS strike report, which stated that 35.1k workers were on strike during the employment survey reference pay period. Given that some of the workers were replaced by temporary hires, we believe that the negative impact on payrolls should be about half of the total workers that are on strike (15-20k). This suggests that even a “clean read” on the labor market would imply that the pace of job growth has taken a step down from the strong job gains in Q4 2015. 

On the rest of the data, we expect the unemployment rate to tick down to 4.9% (consensus: 4.9%) on a rounded basis, as further job gains should put downward pressure on the jobless rate. Last, we forecast that average hourly earnings grew by 0.20% m-o-m (2.4% y-o-y) (consensus: 0.2%) in April, following a 0.31% m-o-m increase in April."