US NFP: We see scope for disappointment - BBH

On Friday, in the US, the December employment report will be released. According to analysts from Brown Brother Harriman, there is scope for disappointment. They see that the most important aspect may be the average hourly earnings. 

Key Quotes: 

“The consensus is for about the same as November or 178k.  We see scope for disappointment.  Over the last ten years, December has seen less job growth than November in seven times and for the last three years in a row.  This is not sufficient to refute the null hypothesis, but it may make one cautious.  Moreover, the US economy appears to have slowed down considerably after that heady 3.5% pace reported in Q3.  The NY Fed has the economy tracking 1.8% in Q4. The Atlanta Fed's tracker is likely to fall from the 2.5% pace seen on December 22 as subsequent data, including the preliminary merchandise trade figures in November.”

“Many economists anticipate that the unemployment rate will tick up to 4.7% from 4.6%. Recall that the unemployment rate had fallen sharply from 4.9% in October. The underemployment rate fell from 9.5% to 9.3%, its lowest level since the spring of 2008. The work week is important to track because of the output implications, given the size of the workforce.”

“However, barring a major surprise, the most important aspect of the report may be the average hourly earnings. It was a disappointing when it fell by 0.1% in November.  The year-over-year pace may recover to the recent high seen in October of 2.8%. In December 2015, it was 2.6%.  In December 2014 it was 1.7% and 2.0% in 2013.”