US: Payroll gains probably remained solid - SocGen

In December, analysts at Societe Generale are looking for US nonfarm payrolls to have increased by 185,000, essentially in line with the recent trend (three-month average of 176,000).

Key Quotes

“Payrolls gains are likely to be relatively broad-based, with increases expected in construction, professional business services, education/health, and leisure and hospitality. In fact, the one-month diffusion index has averaged 57.4 thus far in Q4, close to the year-to-date average of 57.0, suggesting a healthy breadth of gains.”

“One surprise in the payrolls data the last couple of months was the retail sector, which shed 9,000 jobs in October and another 8,000 positions in November. Most of this was concentrated in the clothing/accessories sub-sector, which lost 18,600 jobs in October and shed another 17,600 jobs in November. The combined loss of just over 36,000 positions was the second-biggest two-month drop in this sector after the November-December 2008 period and the second-largest since the data began in 1990. This is especially surprising given that the yoy growth rate in retail sales at clothing stores bottomed at -1.0% in May 2016 and climbed to 1.9% in October stood at 0.9% in November. Although the pace of sales at clothing stores has averaged only 0.1% per month from September to November, that is in line with the year-to-date average, so the hefty decline in jobs in this sub-sector seems overdone. We look for retail jobs to have rebounded by 10,000 in December.”

“Meanwhile, average hourly earnings slid by 0.1% in November, but calendar effects may have led to a 0.3% rebound in December, which would push the annual rate back to 2.8% from 2.5% (average hourly earnings in December 2015 were little changed). Elsewhere, the unemployment rate slid from 4.9% to 4.6% in November, but we expect that a rebound in the labor force in December led to a partial retracement, with the rate rising to 4.8%.”