Deutsche: Above-Consensus Payrolls, But Watch Broader Variables

Deutsche expects an above-consensus +800k payrolls figure Friday (with private +750k) which would lead to a fall in the unemployment rate to 5.9% (in line w consensus) from 6.1%.

• They see an "outsized contribution" from leisure and hospitality sector payrolls, "which may temper average hourly earnings growth (+0.2%).
• They expect a small decrease in the workweek, to 34.9 hours vs 35.0 hours in April - and note that "from an income perspective, every one-tenth decrease in the work week is worth roughly 350k jobs".
• From a broader perspective, they see "limited evidence that enhanced unemployment insurance benefits are exerting a drag on employment" (pointing in part to larger shortfalls relative to pre-COVID employment levels in high-wage states, as opposed to lower-wage states; also noting recent job gains being "concentrated in low-wage sectors").
• And from the Fed's perspective, while FOMC officials "will no doubt be looking for meaningful improvements in thepace of job gains and the U-3 unemployment rate, market participants should also be cognizant of the distributional variables that the Fed is tracking as relates to their
  maximum employment objective".