Jobs Report Beats, But Average Hourly Earnings Misses

It’s jobs day, and that’s fun, although one certainly imagines that barring some kind of catastrophe, Friday’s print isn’t going to change any minds at the Fed.

As usual, the AHE print will be in focus.

Bloomberg has updated their customary recap on that. Average hourly earnings has driven the market’s response to three of past six reports. Here’s the latest rundown:

  • May data released June 2: NFP rose 138k vs 182k est.
    • UST yields fell led by 5Y and 10Y as report had little impact on expectations for June rate increase; 10Y yield declined as much as 7bp, closed lower by 5.2bp at lowest level since November
    • S&P 500 climbed 0.3% to a then-record high
  • April data released May 5: NFP rose 211k vs 190k est.
    • UST yields initially climbed, then retreated as attention turned to downward revisions to March data and unexpected drop in y/y average hourly earnings
    • 10Y yield plied a 4bp range during 15 minutes after the release, closed lower by less than 1bp
    • S&P 500 rose 0.4% to a then-record high close
  • March data released April 7: NFP rose 98k vs 180k est.
    • UST yields fell to session lows, then immediately rebounded as focus shifted to the unexpected drop in the U.S. unemployment rate to the lowest level since 2007
    • 10Y yield’s 11bp daily range was the biggest since Dec. 14
    • S&P 500 fell less than 0.1%
  • February data released March 10: NFP rose 225k vs 200k est.
    • USTs gained as data was viewed as affirming expectations Fed would raise rates on March 15 without leading the market to price in more than two additional hikes in 2017
    • S&P 500 rose 0.3%
  • 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%

As for Goldman, they’re playing it safe. Here are the bullet points from their longer preview because God knows you wouldn’t read the whole thing if we printed it:

We estimate nonfarm payrolls increased by 180k in June, roughly in line with consensus of +177k and an acceleration from the May pace of +138k. Our forecast reflects mixed labor market fundamentals in the month – including solid employment surveys but weaker jobless claims – as well as a positive impact from youth summer hiring, which we believe the May payrolls survey period did not fully reflect.

Youth

We estimate the unemployment rate remained stable at 4.3%, though we view the risks as skewed towards rounding up to 4.4%, reflecting the reversal of a pronounced drop in youth participation rates in May. Finally, we expect average hourly earnings to increase 0.3% month over month, reflecting somewhat favorable calendar effects, and 2.6% year-over-year.

Here are the estimates and priors:

  • Change in Nonfarm Payrolls, est. 178,000, prior 138,000
  • Change in Private Payrolls, est. 170,000, prior 147,000
  • Change in Manufact. Payrolls, est. 5,000, prior -1,000
  • Unemployment Rate, est. 4.3%, prior 4.3%
  • Average Hourly Earnings MoM, est. 0.3%, prior 0.2%
  • 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. 62.71%, prior 62.7%
  • Underemployment Rate, prior 8.4%

Finally, here are the numbers, just out:

  • U.S. June Nonfarm Payrolls Rose 222k; Unemp. Rate at 4.4%
  • Nonfarm payrolls forecast est. 178k, range 115k-220k from 87 economists surveyed
  • Nonfarm payrolls, net revisions, 47k from prior two months
  • Participation rate 62.8% vs prior 62.7%
  • Avg. hourly earnings 0.2% m/m, est. 0.3%, prior 0.1%
  • Y/y 2.5%, prior 2.4% est. 2.6%
  • Nonfarm private payrolls rose 187k vs prior 159k; est. 170k, range 120k-210k from 39 economists surveyed
  • Manufacturing payrolls rose 1k after falling 2k in the prior month; economists estimated 5k, range -5k to 11k from 24 economists surveyed
  • Unemployment rate 4.4% vs prior 4.3%; est. 4.3%, range 4.1%-4.4% from 83 economists surveyed
  • Underemployment rate 8.6% vs prior 8.4%
  • Change in household employment 245k vs prior -233k

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