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5 Feb 2016
US: January payroll preview – Deutsche Bank
Research Team at Deutsche Bank, suggests that despite an increase in job gains last quarter, the year-over-year rate of nonfarm payroll growth is actually declining.
Key Quotes
“In point of fact, this rate peaked at 2.3% last February, and slowed to 1.9% as of December. Since nonfarm payrolls were up 201k in January 2015, any weaker reading would lead to a further slowing in the year-over-year rate of hiring. (The one caveat is today’s annual benchmark revision, which we discuss in more detail below.)
The employment components of the manufacturing and non-manufacturing ISM surveys are consistent with a downshift in January employment compared to December. The slowdown in the rate of job creation is not unusual. Employment gains always tend to slow when the unemployment rate approaches 5%, and history appears to be repeating in this regard. The only difference is that wage gains have been paltry, at least outside of a few select industries such as construction. Last quarter’s employment cost index, which is broader than average hourly earnings, showed steady and modest year-over-year gains of 2.0%. The latter are expected to show a slightly higher annual growth rate (2.2%) in January.
Today’s employment report will also incorporate five years’ worth of revisions to payrolls, wages and hourly earnings.”
Key Quotes
“In point of fact, this rate peaked at 2.3% last February, and slowed to 1.9% as of December. Since nonfarm payrolls were up 201k in January 2015, any weaker reading would lead to a further slowing in the year-over-year rate of hiring. (The one caveat is today’s annual benchmark revision, which we discuss in more detail below.)
The employment components of the manufacturing and non-manufacturing ISM surveys are consistent with a downshift in January employment compared to December. The slowdown in the rate of job creation is not unusual. Employment gains always tend to slow when the unemployment rate approaches 5%, and history appears to be repeating in this regard. The only difference is that wage gains have been paltry, at least outside of a few select industries such as construction. Last quarter’s employment cost index, which is broader than average hourly earnings, showed steady and modest year-over-year gains of 2.0%. The latter are expected to show a slightly higher annual growth rate (2.2%) in January.
Today’s employment report will also incorporate five years’ worth of revisions to payrolls, wages and hourly earnings.”