US NFP: Job creation in June probably above trend growth – Danske Bank

The jobs report for June, will probably turn out somewhat better than the previous three reports and even though there are some signs that labour market progress has slowed in 2017, there is reason to believe that the June report will be better.

Key Quotes

“This is due to some likely recovery after three rather weak reports and because indicators like PMIs suggest higher employment growth. We expect employment rose 180,000 in June and we continue to see the service sector as the main contributor with an expected increase of 150,000 and manufacturing contributing 15,000. Note that even though job growth has slowed in the first five months of 2017, it is still significantly higher than the structural growth in the labour force. Hence, it is strong enough to tighten the labour market and lower the unemployment rate over time. We estimate the unemployment rate remained flat at 4.3%, but stress that if participation rates start to increase again we may see a rise in unemployment, which should not be seen as a cause of concern. Finally, we estimate average hourly earnings increased 0.3% m/m, implying a wage growth rate of 2.6% y/y.” 

“While most labour market indicators are now stronger than during the recent upturn, the slack indicators still suggest there is some slack left in the labour market, as the number of marginally attached, part-time workers for economic reasons is still high and the number of the long-term unemployed is still elevated. This also suggests that the unemployment gap is not closed yet. One reason may be that people on the edge of the labour market do not have the necessary qualifications, as there are many positions which businesses are unable to fill.”