US nonfarm payrolls expected to grow by 160k in September - Nomura

Research Team at Nomura, notes that the pace of US employment growth slowed in August, only adding 151k workers to payrolls in August following gains of 271k and 275k in the prior two months.

Key Quotes

“Data on the labor markets remain, on balance, sanguine. Initial and continuing claims remain at historically low levels, and consumers have reported more positive views on the job market.

But not all data on the labor market have been pointing up. The latest national employment indicators from the ISM manufacturing and nonmanufacturing reports suggest employment activity has been sluggish. Plus, regional employment indicators from the Philly Fed and Empire State surveys for September were well entrenched in negative territory.

Our private payrolls tracking model indicates businesses gained 214k workers in September, which would suggest a reacceleration in job growth. But we think that our model may be giving a too optimistic read on job growth as it relies heavily on the claims data which do not necessarily imply more job creation, just fewer involuntary separations.

Taking all these factors into account, we think nonfarm payrolls grew by 160k with 155k of those workers being added to the private sector. Given the weak employment data from regional manufacturing surveys, we think manufacturing payrolls declined by 5k. We also think the steady job gains should be enough to absorb any incoming labor supply but not enough to exert meaningful pressure on the unemployment rate. Therefore, we forecast an unchanged unemployment rate at 4.9% in September. Elsewhere, we forecast average hourly earnings grew by 0.2% m-o-m (we have revised down from our initial forecast of 0.3% m-o-m).”