By Ian McKendry

WASHINGTON (MNI) – The November Bureau of Labor Statistics non-farm
payrolls number is expected to tell a story of stronger private payroll
employment, and after October’s addition of 151,000 jobs a similar
increase may be a sign the economy is gaining traction, although
continued budget constraints are likely to weigh on state and local
hiring, and the benefits of the stimulus are all dried up.

A Market News International survey of economist centered on a
reading of an additional 150,000 total non-farm payrolls added in
November and an unemployment rate staying at 9.6%.

While most economists seem to be focusing on another strong
number, Tom Porcelli, chief U.S. economist at RBC Capital markets, is a
little more bearish.

“There were a number of categories that really posted outsized
gains last month,” Porcelli told MNI.

Porcelli said retail, professional business services and
healthcare all posted meaningful gains which he said was out of tune
with what “we know is going on in those sectors.”

“In other words they certainly are not ramping up the way that
these numbers would suggest, so we are really looking for a modest
pullback, and that really explains our sort of below-consensus call,”
Porcelli said.

However, Porcelli added, “I don’t want to put a negative spin on
this; I don’t think it deserves it. He said even if last month was a
“blow out” private employment has been relatively strong on the year.

The ADP employment report, a measure of private employment came in
Wednesday morning above expectations, at 93,000, but Porcelli speculated
that it could just be playing “catch up” to the BLS private payroll
number.

Porcelli also said he expects government payrolls to fall as state
and local governments continue to face budget constraints.

A little less bearish, but not quite a bull, Mike Englund, chief
economist at Action Economics, told MNI he is forecasting a reading of
plus 145,000 for the headline non-farm payrolls number and 160,000 for
private payrolls.

Englund said his original forecast was for 125,000 jobs added in
November but after a strong ADP, Chicago PMI, and ISM Manufacturing
numbers he revised his forecast up.

“We think also a point can be made that the best bet probably sits
to the high side which might explain some of the stronger forecast from
economists,” Englund said.

Englund did warn that there may be “risk of a pop” but if the
private payroll number came in at 160,000 it would show that there was
significant job growth in October in November.

“It’s not clear why that’s happened relative to some of the other
more inert patterns in what we have seen in the sales and inventory
data,” Englund added.

“Our assumption is state and local will remain weak into the new
year we still have budget constraints,” Englund said, forecasting a drop
in government employment.

He also said much of the stimulus effect has diminished and many
statehouses are now Republican which will probably mean a new focus on
cutting spending.

Englund said the unemployment rate, which he called the “sleeper
story for the year,” could increase, if not in November, in the coming
months.

Englund said there was a “mass exodus” of people leaving the work
force but as the employment situation improves, more people might enter
the work force, driving up the unemployment rate.

Jim O’Sullivan, chief economist at MF Global, forecasts a private
payrolls increase of 200,000 and a headline non-farm payrolls number of
190,000 in a telephone interview.

O’Sullivan pointed to the improving weekly jobless claims
for his higher-than-consensus estimate

However, O’Sullivan also forecasts a 10,000 drop in government
employment.

** Market News International Washington Bureau: 202-371-2121 **

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