We're about to get the first 'clean' jobs report in a few months — here's what Wall Street is looking for


cleaning worker stage american flagReuters/Robert
Galbraith

  • The November jobs report will be released on
    Friday. 
  • After hurricanes slowed down job creation in the fall,
    this should be the first reading on the labor market without
    weather-related distortions.
  • The Federal Reserve is set to raise interest rates
    again next week, and will likely cite a strong labor market as
    one of its reasons. 

The final US jobs report released in 2017 is due on Friday, and
it will be revealing.

This fall, the hurricanes that hit the Southeastern US kept many
Americans away from their jobs and off their employers’ payrolls.
This led to a very weak month
of job creation in September, with just 18,000 nonfarm payrolls
added.

But this was followed by an impressive
October
as people returned to work. And so, the past two
months have not provided a clear reading on how the job market is
doing. 

“Following hurricane-distorted activity over the prior two
months, November’s employment report performance should be a
‘clean’ read on the health of the US labor market as the year
comes to a close,” said Sam Bullard, a senior economist at Wells
Fargo, in a note.

Here’s what economists forecast will be in the Bureau of Labor
Statistics’ report, via Bloomberg: 

  • Nonfarm
    payrolls: +195,000 (261,000
    prior)
  • Unemployment
    rate: 4.1% (4.1% prior)
  • Average hourly earnings
    month-on-month: +0.3%
  • Average hourly earnings
    year-on-year: +2.7% (2.5%
    prior)
  • Average weekly hours worked: 34.4

Nearly 200,000 net new jobs and the lowest unemployment rate in
17 years would make for a strongly headlined report.
Additionally, sectors that weren’t affected by the hurricanes
have held up in recent months:

 Screen Shot 2017 12 07 at 3.12.51 PMDeutsche
Bank

In a note, Nomura’s Lewis Alexander points out that the
manufacturing sector has recently made above-average
contributions to economic growth, and could have gained up to
20,000 payrolls in November.

Exports, equipment, structures, and inventory investment have
contributed an average of 1.3 percentage points to gross domestic
product-growth over the past two quarters. That’s an improvement
from the average drag of -0.22 percentage points during the
previous nine quarters, as the sector faced lower overseas demand
due to a stronger dollar, Alexander said.

The Commerce Department said last week that the
economy grew faster than initially reported
in the third
quarter, at a 3.3% annualized rate. It was the fastest pace in
three years, and bodes well for the jobs market. 

Next Wednesday, the Federal Reserve is most likely to raise its
benchmark interest rate again and cite a strengthening labor
market as one of the reasons why.

“Looking ahead, it’s going to be interesting to see whether
the Fed starts to get worried about further falls in
unemployment,” said Luke Bartholomew, an investment
strategist at Aberdeen Standard Investments, in a note.

“Falling unemployment is generally thought of as a
universally good thing. But good news could become bad news if it
looks like unemployment has dropped so far as to signal an
economy overheating. This would force the Fed onto the back foot
and possibly into a more aggressive set of rate hikes.”

Slow wage growth, however, may continue to give the Fed reason to
raise rates slowly. One bright spot in wages is the fact that
low-income earners have experienced faster growth this year than
people with high-paying jobs.  



Screen Shot 2017 12 07 at 3.13.37 PM

Deutsche
Bank

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