NFP preview: November not a key determinant - Danske Bank

According to analysts from Danske Bank, the November jobs report (to be released on Friday) won’t be a key determinant for the decision to hike in December from the Federal Reserve. 

Key Quotes: 

“Labour market data have been solid in November, with low initial claims and the Markit PMI employment index pointing to slightly higher job growth. However, estimation models based on claims have tended to overestimate job growth recently, while the PMI employment index has underestimated job growth. The ADP jobs report was good overall with strong jobs growth of 210,000 in November, but downward revision of 28,000 in October.”

“We estimate non-farm payrolls increased by 170,000 in November in line with the recent trend and more or less in line with the consensus of 180,000 (…) We estimate an unchanged unemployment rate at 4.9% and that average hourly earnings increased 0.2% m/m implying an unchanged wage growth rate of 2.8% y/y.”

“On average, job growth has been around 50,000 lower per month in 2016 compared to 2015. With the economy gaining momentum now, we could see employment growth move a bit higher in the coming months. However, a tighter labour market now should cap jobs growth. The magnitude of employment growth over the coming year depends on the amount of slack left in the labour market. Flat unemployment measures and wage inflation have suggested slack still persists.”

“We believe the FOMC will look through accelerating wage inflation in the short term and let the labour market run a bit hot to make sure slack is fading and core inflation is moving towards (above) the two percent target.”