US NFP Preview: 6 major banks expectations from April month’s employment report

We are closing in on the April month’s release of US Non-Farm Payrolls data and after a dismal figure of 98,000 in March which was partly related to adverse weather effects, all the 6 major banks expect that the April NFP to post a reading in between 165K to 190K while they expect the unemployment rate to correct slightly to 4.6% after hitting a new cycle low of 4.5% in March. As the clock ticks by, here are the expectations as forecasted by the economists and researchers of 6 major banks.

Nomura

We expect nonfarm payrolls to have increased by 185k (Consensus: 190k) in April and private payrolls to have increased by 180k (Consensus: 188k), implying a 5k gain in government jobs. Recent data on employment point to a return to trend in job creation following a downside surprise in March, which was likely due to temporary factors. Including March’s lower-than-expected reading, nonfarm payroll employment has an average increase of 178k over the first three months of 2017. From the household survey, we expect the unemployment rate to remain unchanged at 4.5% as increases in household employment will likely revert to trend after two months of outsized gains (Consensus: 4.6%). Favorable labor market conditions over the past three months may also motivate discouraged workers to re-enter the labor force in search of employment. Regarding average hourly earnings, we expect a healthy 0.33% m-o-m (2.69% y-o-y) increase (Consensus: 0.3% m-o-m, 2.7% y-o-y), a slight uptick from March’s 0.2% m-o-m (2.67% y-o-y) increase.

TDS

We expect April nonfarm payroll employment to pick up to a 165k pace after a disappointing 98k advance in March. The weak March print was partly related to adverse weather effects in our view, hence we expect job growth to rebound consistent with labor market indicators through April (survey employment measures, the Conference Board job differential and jobless claims). But we see limited upside this month as we believe a slower pace of job growth is gradually emerging, consistent with nearing full employment. Data in the past week is also supportive of our below-consensus call; in particular we take note of the ISM non-manufacturing employment print, which held at levels consistent with gains closer to 100k. The unemployment rate is expected to correct slightly to 4.6% after hitting a new cycle low of 4.5%, in line with a likely pullback in household employment paired with some stabilization in unemployed workers. We also look for a strong 0.4% m/m increase in average hourly earnings in April, partly reflecting upward bias from calendar effects. That would leave the year-on-year pace unchanged at 2.7%, with a risk that it could round to 2.8%.

Rabobank

Last month, many analysts were too quick to dismiss the weak nonfarm payroll growth in March as a reflection of bad weather. However, other BLS data revealed that there was only a minor increase in the number of people with a job not showing up for work due to bad weather between February and March. In our view, it’s too early to dismiss recent data as noise, in fact there may be several signals that should not be overlooked. What may appear as transitory at first, could very well be a more sustained loss of momentum in the economy. There are only two more Employment Reports before the next FOMC meeting on June 13-14. The first will be published today at 14:30 CET. The consensus expectation is a rebound in nonfarm payroll growth to 190K. However, our own econometric model – which takes into account other labor market data that have already been published – generates a 160K forecast, well below consensus.

Danske Bank

The main event today is the US jobs report for April. We estimate nonfarm payrolls rose 170,000 in April, a bit below consensus of 190,000 but in line with the employment growth in the ADP jobs report for April. We estimate the unemployment rate ticked up to 4.6% after the big fall to 4.5% in March. While we expect wage growth to fall to 2.6% y/y, consensus calls for an unchanged print at 2.7% y/y. 

Westpac

Through early 2017, as payrolls printed well above expectations, we continued to emphasise that job growth was set to slow, not because the economy had deteriorated but rather simply because full employment had already been attained. March's 98k result and the 38k in downward revisions to the prior two months went a long way towards bringing about the pace of jobs growth we had previously anticipated. At 178k the Q1 average pace of job creation is still best considered strong. We expect a similar outcome in April, circa 180k. Household survey estimates have been volatile of late, but the level of the unemployment rate should remain broadly consistent with full employment, near 4.6%.

BBH

Non-farm payroll growth is expected to snap back toward its underlying trend, and anything above 200k at this stage of the cycle must be considered robust.  Before the sub-100k increase in March, the six-month and 12-month averages straddled 190k.  Average weekly hours may tick up to 34.4 hours.  It has been averaging 34.4 hours for the last 12 and 24 months.  Remarkably, and with little fanfare, the US economy has achieved what the French state struggled to do, and that is a 35 hour work week. A 0.3% increase in April average hourly earnings will maintain the year-over-year pace of 2.7%, which is what it has averaged over the past six and 12 months.  The modicum of improvement is evident in comparing it to the 24 month average of 2.5%.  

Click here to read more about the NFP preview from our Chief Analyst Valeria Bednarik titled “Nonfarm Payrolls Forecast: who cares? USD will fall anyway”