Analysts at Nomura explained that they expect nonfarm payroll employment to increase 180k in September, a slight deceleration from the 201k pace in August and just below the six-month average of 192k.
Key Quotes:
“Our forecast remains consistent with an economy growing at roughly 3% and would be well above the pace of employment growth required to absorb new labor market entrants. “
“Employment indicators during the month remained in healthy territory with low initial jobless claims and elevated regional business survey employment indices. We do not expect Hurricane Florence, which made landfall in the Carolinas around mid-September, to affect September’s payroll employment numbers materially.”
“The hurricane’s landfall on the last day of the BLS survey week (the week containing the 12th of the month) likely minimized the impact on employment as any worker who received a paycheck for that week would be counted in the survey. This stands in contrast with Hurricane Harvey and Irma last year, the latter of which made landfall at the very beginning of the survey week, resulting in significant disruptions to payroll employment.”
“After a 3k decline in employment during August, we expect manufacturers to add 10k net new jobs in September. However, with increased trade tensions, further signs of weakening in manufacturing hiring activity could portend a broader slowdown in industrial activity, increasing the importance of the September manufacturing hiring data. “
ADP report adds upside risks to forecast
“Finally, the ADP employment report showed a strong 230k gain in September private employment, driven by a strong 34k gain in construction sector jobs, which appears to be at odds with the recent slowdown in residential construction activity.”
“The ADP report adds some upside risk to our forecast. While, as discussed above, we think that weather factors didn’t affect nonfarm payroll numbers substantially, the strong ADP report does not necessarily corroborate our view as the impact of Hurricane Florence on the ADP report was likely muted as it counts the number of employees on the payroll whether or not they were actually paid during the survey period. Moreover, the employment index for the ISM non-manufacturing survey rose 5.7pp to 62.4, the highest level ever recorded, adding further upside risk to our forecast.”
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