Morning Brief – Nonfarm Payrolls Preview

Markets are starting to consolidate after some major moves on Thursday and Friday, ahead of the release of the November monthly jobs report during the US session.

The Non-farm payrolls are expected to show +200,000 versus the consensus of +261,000 in October. The Unemployment rate is expected to be 2.7%. 3.7% is basically the same as in October.

Other analysts are also calling for Average hourly earnings, month-over-month to come in at +0.3% versus +0.3% in October, and Average hourly earnings, year-over-year: +4.6% expected vs. +4.7% in October.

If today’s jobs figures come in on par with analysts’ forecasts, the estimated print will mark the lowest monthly reading in non-farm payrolls since April 2021.

With pre-pandemic levels averaging 150-200,000 jobs added or created per month, the figure would reflect a healthy snapshot of labour conditions based on historical trends.

Yesterday’s ADP report was also a warning of what could come today. The release, which serves as an imperfect precursor to the government’s official numbers, showed private companies added 127,000 jobs in November, nearly half of the prior month’s number and below an estimate of 190,000.

Last month, the US economy added a stronger-than-expected 261K jobs in October of 2022, above market forecasts of 200K. Although it is the weakest reading since December 2020, figures continued to point to a strong albeit slowing labour market, as worker shortages persist.

Figures for September were revised higher by 52K to 315K. In October, notable job gains occurred in health care, namely ambulatory health care services, nursing, and residential care facilities, hospitals, and professional and technical services.

Also, the manufacturing sector unexpectedly added 32,000 jobs, with some investors expecting a fall; and the leisure/hospitality sector added 35,000 jobs. Monthly job growth has averaged 407,000 thus far in 2022, compared with 562,000 per month in 2021.

Nomura investment bank is also predicting, alongside other major financial institutions that the American jobs situation is going to worsen dramatically last month.

Nomura states that “Nonfarm payroll employment growth likely slowed to 180,000 in November from 261,000 in October” and “evidence continues to build that increasing uncertainty is affecting hiring activity.”