We’ll get jobs on Friday and after Thursday’s ADP beat, there’s a palpable sense of optimism out there as evidenced by the overnight risk-on mood.

Here are the estimates:

• Change in Nonfarm Payrolls, est. 182,000, prior 211,000
• Change in Private Payrolls, est. 175,000, prior 194,000
• Change in Manufact. Payrolls, est. 5,000, prior 6,000
• Unemployment Rate, est. 4.4%, prior 4.4%
• Average Hourly Earnings MoM, est. 0.2%, prior 0.3%
• Average Hourly Earnings YoY, est. 2.6%, prior 2.5%
• Average Weekly Hours All Employees, est. 34.4, prior 34.4
• Labor Force Participation Rate, est. 62.93%, prior 62.9%
• Underemployment Rate, prior 8.6%

For their part, Citi sure was excited about the ADP print, upping their NFP estimate following the number:

We have revised up our nonfarm payrolls estimate to 175K in May, following the 253K job gain in the ADP report. NFP rising 175K would be down from 211K in April but in line with the six-month average gain of 176K. Average hourly earnings are likely to grow by below-consensus 0.1% MoM and remain steady on a year-over-year basis at 2.5%. The unemployment rate will probably remain unchanged at 4.4%.

That AHE bit is important. That’s why we highlighted it.

The AHE number has been on the market’s mind a lot over the last six months, and as Citi goes on to write, “soft recent inflation prints have focused market and FOMC attention on subdued price pressures [and] as a result, a downside miss on AHE as we are forecasting could reinforce the view of a lack of inflationary pressures in the economy.”

If you’ve got a short memory or if your memory is simply impaired by years of substance abuse, here’s a quick flashback to some fairly recent reports where the AHE print influenced the subsequent market reaction. Via Bloomberg:

• January data released Feb. 3: NFP rose 227k vs 180k est.
  • Report spurred gains based on 0.1% increase in average hourly earnings vs 0.3% forecast, which were erased after San Francisco Fed President Williams said there was an argument for raising rates in March
  • S&P 500 rose 0.7%
• December data released Jan. 6: NFP rose 156k vs 175k est.
  • USTs fell as report included bigger-than-forecast 0.4% increase in avg hourly earnings that pushed y/y rate to 2.9%, highest since 2009, and upward revision to November NFP change to 204k; 10Y yield closed higher by 7.5bp
  • S&P 500 rose 0.4%
• November data released Dec. 2: NFP rose 178k vs 180k est.
  • Report spurred temporary gains based on unexpected 0.1% drop in avg hourly earnings that pulled y/y rate down from highest since 2009; USTs resumed rising later in the session led by EGBs as focus turned to Dec. 4 Italian referendum
  • S&P 500 rose 0.04%
• October data released Nov. 4: NFP rose 161k vs 173k est.
  • Yields rose to session highs after jobs report, which also showed avg hourly earnings rose 2.8% y/y, highest since 2009; yields retreated and closed lower by 2bp-5bp amid steeper declines for gilt yields and drop in oil to 1-month low
  • S&P 500 fell 0.2%

For what it’s worth, here’s Goldman’s quick preview:

We estimate nonfarm payrolls increased 170k in May, a moderate slowdown from April’s +211k pace and modestly below the three-month moving average of +174k. While labor market fundamentals remained broadly stable – featuring a further decline in continuing jobless claims – recent deterioration in service sector employment surveys suggests hiring may be slowing at the margin. We also believe a favorable swing in the weather between the March and April survey periods suggests the 211k pace of April job growth likely overstates the near-term underlying trend, which we believe is closer to 175k (and should slow further as the economy moves beyond full employment). Relatedly, May is also an important hiring month, and labor supply constraints in some geographies and industries suggest some additional downside risk. On the positive side, both jobless claims and the ADP report suggest more favorable labor market fundamentals, and the end of the federal hiring freeze suggests scope for above-trend growth in federal employment.

And finally, here’s Deutsche’s LaVorgna (because you know you were wondering):

Commentary for Friday: The ADP employment survey showed a strong 253k gain in private payrolls last month. Indeed, yesterday’s data were very much in line with our above-consensus forecast for this morning’s nonfarm payroll report from the Bureau of Labor Statistics (BLS). Within the details of the ADP survey, the construction sector (+37k vs. -7k) rebounded following an unusual decline in April. Importantly, we learned that trade, transportation and utilities hiring (58k vs. +9k) appears to be recovering somewhat after a rocky start to year.

For example, according to ADP, job gains in these industries averaged just 14k over the first four months of the year, less than half of last year’s average monthly gain of 33k. Our best guess is that the May surge in trade, transportation & utilities employment reflects a stabilization in retail-sector hiring, which has been a recent source of weakness in BLS nonfarm payrolls.

Through the first four months of the year, retail trade employment in the BLS report has declined by -3.6k on average, which compares to gains of 17k per month in 2016. As the ADP survey indicated yesterday, it is possible that retail employment is stabilizing after a swath of store closings earlier this year. To be sure, the secular uptrend of online shopping will continue to pressure retail hiring long term, but for now at least, the latest ADP data hint at a healthy rebound in retail hiring in May. The monthly change in ADP trade, transportation and utilities employment is significantly correlated with that of retail hiring in the BLS report. This makes sense because retail trade accounts for a little less than 13% of private payrolls compared to less than 5% for transportation and utilities.

There are a couple of other reasons why we expect an above-consensus May employment gain. One, the four-week moving average of jobless claims during the May survey period was 241k, which is the lowest for any employment survey week since July 1973 (240k). Jobless claims are one of the best real time indicators of the health of the labor market and highly correlated with overall economic activity. Two, withheld income tax receipts are tracking up close to 7% compared to a year ago, which points to rising income growth. Since tax receipts are a direct function of employment, hours and wages, the recent acceleration in income growth should at least partly be reflected in the pace of job gains. We are less confident in wages, whose growth rate remains soft relative to the sub-5% level of the unemployment rate.

If our forecast for May average hourly earnings (AHEs) proves prescient, the year-over-year growth rate of the series would likely round up to just 2.6%, which compares to a 2.5% annual pace in April and a cyclical peak of 2.9% from last December. For some Fed policymakers, a 3.0%-plus growth rate of AHEs would be more consistent with firming core inflation prospects. However, despite stilllow wage inflation, the May employment report should keep the FOMC on track to hike rates again at the June 14 meeting.