US nonfarm payrolls forecast to have advanced by 195,000 in July - RBS

Research Team at RBS, notes that May’s dismal US employment gain (+11,000) was followed by an explosive advance (+287,000) in June.

Key Quotes

“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.

While our top-down models continue to point to a trend in payroll growth of between 100,000 and 150,000, looking at job growth by sector, we see room for a somewhat better result in July. Ongoing strength is likely to have been concentrated in service-producing industries. Even assuming modest increases in other service sector jobs, we believe employment gains across service-producing industries alone could have totaled more than 150,000.

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.”