Thursday this week (16 Nov) brings the October labour market report, a day after the Q3 wages data (preview here)
NAB preview:
Employment on Thursday, the underlying story remains of positive forward indicators that suggest the recent run of strong employment growth should continue. Trend employment growth of 24k a month will continue to put downward pressure on the unemployment rate and NAB thinks the unemployment rate is likely to reach 5¼% by mid-2018
However, for this month NAB sees some downside risks to employment growth due to unfavorable sample rotation effects in the survey that underpins the employment numbers.
- Each month 1/8th of the sample gets replaced with a new sub-sample and if their characteristics differ this can impact on printed employment growth in the month. This month the outgoing sample that will be replaced has a higher tendency to be employed compared to the sample as a whole (employment to population ratio of 62.8% compared to the sample as a whole of 61.6%).
- If the outgoing sub-sample is replaced with a sample that is more similar to the rest of the 7/8th of the survey, it could drag on employment growth in the month.
- NAB estimates that this potential drag could be worth around 12-34k. NAB consequently forecasts a below consensus print of 12k for employment this month (consensus +20k).
That said we continue to assess employment growth as relatively strong. As for the unemployment rate, this is typically less affected by sample rotation and we expect the unemployment rate to be unchanged at 5.5%.
