US NFP Preview: Rebound in June – Danske Bank

Research Team at Danske Bank, estimates that the US non-farm payrolls increased 150,000 in June, which is a little lower than consensus at 175,000, but significantly higher than the May figure of 38,000.

Key Quotes

“Hence, we expect jobs growth in June has rebounded from the low level in May. We see the May jobs report more as a ‘one off’ rather than a new normal, although it magnifies the signal that job growth has indeed slowed lately. Leading indicators point to slower, but solid job growth. The Markit PMI employment index still points to modest job growth and initial claims figures have averaged lower in June than in May, indicating that job growth has rebounded in June.

We expect average hourly earnings increased 0.2 % m/m in June in line with the recent trend implying an annual growth rate of 2.7 %, the highest since the crisis. Average hourly earnings fluctuate a lot but in general we have seen a pickup in wage growth since the beginning of 2015, as the labour market has continued to tighten. The unemployment rate declined to 4.7% in May from 5.0 % in April, due to the falling participation rate. We think the large fall in the unemployment rate to 4.7% in May will be reversed a little, to 4.8 % in June.

We estimate employment growth continued to be driven by the service sector in June, with jobs growth of 140,000. We think the service sector will continue to grow at a solid pace over the coming months with employment growth to continuing at solid levels. We estimate manufacturing employment decreased marginally by 10,000 in June, as we still see some headwinds for the manufacturing sector with slow growth in China, a strong dollar and low oil investments.”