US employment to be released on Friday. What to expect?

Author: Greg Michalowski | Category: News

80 straight months of job gains.

The US non farm payroll has increased for 80 consecutive months.  Tomorrow it is expected to make that number 81.  

  • The average gain over the 80 months is 197K.  
  • The average over the last 12 months is 189K
  • The average over the last 3 months is 121K. That is the lowest 3 month average since June 2012 (5 years ago).  
So is that a concern?

Not really. 

The unemployment rate back in June 2012 was at 8.2%. The rate now is 4.3%.  As the unemployment rate goes lower, and you move toward full employment, the gains in employment become harder and harder to be sustained. As a result, the 121K three-month average at 4.3% unemployment rates is better than 121K in 2012 when unemployment rate was at 8.2%.  

The expectation for tomorrow is for the US to add 178K jobs. That is stronger than the 138K in May.  A number like that (or really most anything positive), would probably not deter the Fed from their planned path. The Fed is expecting to raise rates 1 more time in 2017 and also start a modest roll off the QE purchases starting in September. 

The biggest surprise now would be if there was a oversized gain in jobs, along with a run up in the average earnings (say up to 2.8% or above).   

Other details:
  • US unemployment rate is expected to remain unchanged at 4.3%.  That is the lowest since May 2001

  • The average hourly earnings are expected to rise by 0.3% MoM. The YoY is expected to rise by 2.6% vs 2.5%. 
  • The change in Manufacturing is expected to show a 5 K increase vs -1K in May.  
  • The underemployment rate came in at 8.4% last month. That was the lowest since September 2007 - before the start of the recession (see chart below). There is no expectations.  Although not making at the lowest level since 2001 like the unemployment rate, a move below the 7.9% and we will be talking about it.  

The employment report will be released at 8:30 AM ET/1230 GMT tomorrow. 
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