Job report preview
We expect nonfarm payrolls to gain 240,000 in November , which is a little above consensus of 228,000. We expect the unemployment rate to be flat at 5.8% (same as consensus).
One downside risk to the non-farm payroll this month is the weather . It has been fairly cold in the US and due to the weather conditions people might have had trouble keeping or doing their job. In addition , initial jobless claims have trended slightly higher over the past weeks and the Conference Board's measure of sentiment towards the labour market weakened in November. Despite this, our model is optimistic on payrolls, which is primarily due to the strong momentum in economic activity lately.
Our forecast of an unchanged unemployment rate in November is just a pause before moving lower. Unemployment has been falling every month from July to October and we expect this trend to continue in coming months. The reasoning behind our expectation of a flat reading on Friday is the fact that the household survey has been overshooting the non-farm payrolls a lot lately and we look for some moderation of that. We therefore expect a pause in the decrease in unemployment until the household survey is more in line with the non-farm payrolls.
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