US NFP Preview: 7 major banks expectation from June employment report

Today, the all-important June month’s non-farm payroll report from the US is scheduled to be released. As the clock ticks by, here are the expectations as forecasted by the economists and researchers of 7 major banks regarding the upcoming employment report.

All the 7 major banks expect the June NFP to be stronger than in recent months with reading to lie somewhere in between 165K to 210K, while they expect the unemployment rate to hover in between 4.3% to 4.4%.

Danske Bank

The jobs report for June, due on Friday, will probably turn out somewhat better than the previous three reports. Although there are some signs that labour market progress has slowed in 2017, there is reason to believe that the June report will be better. This is due to some likely recovery after three rather weak reports and because indicators like PMIs suggest higher employment growth. We expect employment rose 180,000 in June and we continue to see the service sector as the main contributor with an expected increase of 150,000 and manufacturing contributing 15,000. We estimate the unemployment rate remained flat at 4.3%, but stress that if participation rates start to increase again we may see a rise in unemployment, which should not be seen as a cause of concern. Finally, we estimate average hourly earnings increased 0.3% m/m, implying a wage growth rate of 2.6% y/y. 

Nomura

We expect the June employment numbers to point to further tightening in labor markets. June likely saw another strong month of jobs growth. We expect a 165k increase in nonfarm payroll employment, similar to the average pace of the past six months (161k) and above the sustainable pace. We expect average hourly earnings to increase by a healthy 0.34% m-o-m in June (2.69% y-o-y), which would be a sharp uptick from last month’s 2.46% y-oy reading. We expect the unemployment rate in June to remain unchanged from May’s at 4.3%. 

TDS

We expect June nonfarm payroll employment to pick up to a respectable 170k pace in June after registering a disappointing 138k gain in May. At this stage of the cycle we expect gains above 200k to be fewer and far between, though upside surprises cannot be excluded. June is one such month where upside risks could materialize on the back of both robust hard data and surveys. Jobless claims have stabilized near record lows, household sentiment (e.g., Conference Board) has stayed robust, and business survey indicators (regional Fed indexes and ISMs) have also maintained recent strength. The soft ADP print stands alone. At the very least, we expect job gains to remain above the breakeven pace needed for further declines in slack (estimated at roughly 80-120k). The unemployment rate is expected to be unchanged at 4.3%. The number of unemployed workers fell for four consecutive months through May, which at this stage of the cycle looks unsustainable. With some stabilization in June paired alongside ongoing employment growth, we see risks as balanced for a stable reading for the unemployment rate. On wages, calendar effects point to a strong 0.3% m/m increase in average hourly earnings, leaving the year-on-year pace higher at 2.7%. With realized inflation becoming a more deciding factor on the path of future rate hikes, wage growth will be key to watch in the coming months amid heightened questions over the Phillips curve.

BBH

Expectations for today's non-farm payroll report are for a 175k-180k increase.  The monthly job gains have slowed recently.  Consider that the three-month average was a little above 200k in February.  In May it stood at 121k, the lowest since July 2012.  However, given the dynamics of the participation rate, slowing jobs growth has seen the unemployment rate fall from 4.7% in February to 4.3% in May.  The underemployment rate has fallen.  It stands at 8.4%, down from 9.4% in January. A monthly gain of over 200k coupled with an increase in average hourly earnings would go a long way toward underscoring the upside economic surprises seen recently in the US.  It would solidify expectations that the Fed is still on track to continue normalizing its monetary stance, which includes a balance sheet adjustment before the end of the year.  Hourly earnings are expected to have risen by 0.3% for a 2.6% year-over-year rate (up from 2.5% in May).

Westpac

The past three months nonfarm payroll outcomes have been disappointing for the market. The May outcome of 138k was below expectations and also came with 66k in downward revisions to March and April. That left the average for the three months to May at 121k, a material step down from 2016's 187k pace. However, this is not cause for concern. Given we are late in an expansion cycle and full employment has been achieved, employment growth should be expected to slow. A month average pace in excess of 100k is a positive trend. Job growth tends to be volatile on a monthly basis; so, after a string of soft outcomes, we look for a bounce in June, circa 190k. From the household survey, having fallen to 4.3% in May, we expect the unemployment rate to edge back up to 4.4% in June as participation ticks higher.

Deutsche Bank

Looking ahead to payrolls then, following the low 138k print in May the consensus for June is currently sitting at 178k. Our US economists expect a slightly more meaningful rebound to 210k which would be likely sufficient to keep the unemployment rate steady at 4.3% assuming a slight nudge up in the participation rate.

ANZ

ADP employment came in soft, potentially pointing to a soft non-farm payrolls release tonight. The market expects NFP to add 178k jobs today, well above the 92k pace needed to keep unemployment at 4.5% over the next 12 months. Initial jobless claims rose to 248k but are low by historical standards, suggesting that the US labour market continues to tighten, albeit at a moderating pace.

Click here to read more about the NFP preview from our Chief Analyst Valeria Bednarik titled “Nonfarm Payrolls preview: And here comes another soft report”