US NFP Preview: Hiring likely moderated to its trend – CIBC

On Friday, the US employment report will be released, including wage growth and the unemployment rate. Katherine Judge, Economist at CIBC Capital Markets, point out that jobs  likely rose by 182K in July.  

Key Quotes:  

“Employment growth has heated up in the last two months, in line with the scorching pace of growth seen in Q2. But hiring likely moderated closer to its trend rate in July, at 182K. The pickup in participation in June indicates that there is room for more slack in the labor market to be absorbed and alleviates concerns of a widespread labor supply shortage. But a partial reversal of that gain in participation should contribute to a fall in the unemployment rate by two ticks to 3.8%.”

“Wages have continued to disappoint through the summer despite ongoing labor market tightness. However, after last month’s soft print, we could see an acceleration in wage gains to 0.3% as softness in service-providing industries could have reversed in July. That would leave the annual rate unchanged at an unremarkable 2.8%.

“Respectable labor market gains should continue to support healthy consumption in Q3 and it won’t be until 2019 when the effects of higher interest rates really start to bite. From the Fed’s perspective, wage growth still doesn’t look like it will pose a threat to inflation anytime soon.”