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     WASHINGTON (MNI) - Analysts expect the June U.S. employment report to post
a more modest gain than in May, with a median estimate for a gain of 195,000 for
headline payrolls and a 189,000 gain for private payrolls in June. Analysts also
expect average hourly earnings to rise 0.3%, while the average workweek is
expected to remain at 34.5 and unemployment to remain at 3.8%.
     Ahead of the release on Friday, we outline five themes for particular
attention.
--MARKETS AND ANALYSTS AGREE ON AHE 
     Both markets and analysts are expecting average hourly earnings to rise
0.3% in June. Markets and analysts only occasionally forecast the exact same
number, with only three such occasions since July 2017. Only one of those times
were both on target. When both analysts and markets have the same forecast for
average hourly earnings, their average miss is only 0.07pp versus the absolute
average miss for analysts at 0.09pp and for markets at 0.14pp, indicating that
even if the report surprises both markets and analysts, it will likely only be a
minor surprise.
--MARKETS EXPECT SOFTER GAINS THAN ANALYSTS 
     While markets and analysts agree on what they expect for average hourly
earnings, their views delineate slightly for what to expect for growth in
headline payrolls. Markets are expecting a mildly softer gain of 190,000 while
analysts are expecting 195,000 for headline payrolls. However, both forecasts
are down from the 223,000 gain in May. Markets and analysts overestimate and
underestimate the equally as often, with seven overestimates and six
underestimates each. While markets tend to have a larger average overestimate
than analysts, their underestimates are relatively similar with markets
averaging an underestimate of 41,000 while analysts have an average
underestimate of 42,500. This should reaffirm that the payrolls number is likely
to fall somewhere in line with both analyst and market expectations.
--HISTORY SUGGESTS UPSIDE RISK FOR PAYROLLS
     In the last 20 years, there have been 9 underestimates and 10 overestimates
for headline payrolls in June. Most of the overestimates, however, occurred over
10 years ago, and recently that trend has flipped. In each of the last five June
reports, analysts have underestimated the headline number, with an average miss
of 54,000, somewhat higher than the absolute average miss over the last 10 years
of 49,000. If Friday's report follows the recent trend, a larger-than-expected
gain in headline payrolls is likely.
--UNEMPLOYMENT RATE TO REMAIN HISTORICALLY LOW
     Last month, the unemployment rate, at 3.8%, reached its lowest level since
2000. Most analysts are predicting that unemployment will continue to hold at
this level in June. However, some analysts are indicating that while the labor
market will remain strong, the upward trend in job growth will begin to decline,
citing a decrease in temporary help employment as a significant reason for this.
It is interesting to note that as the labor market moves closer to full
employment and the number of available jobs is rising, some private sector
employers are finding it increasingly challenging to fill positions due to an
inability to find qualified candidates. If job growth continues at its current
rate, skilled labor shortages could spread to more industries and prevent
companies from growing.
--LABOR FORCE MAY NOT BE GROWING FAST ENOUGH
     It is possible that a portion of the continued drop in unemployment could
be attributed to a shrinking labor force, as Baby Boomers continue to exit the
labor force and retire. As unemployment began to decline from its post-2008 peak
of 10% in October 2009, so too did labor force participation decline from 65% in
October 2009 to 62.7% in May 2018. Additionally, the annual rate of growth of
the US working age population has been lower than one percent for the past ten
years, a historical first since 1961. This hints that the labor force may not be
growing fast enough to replace all of the vacancies left by new retirees.
However, since new job creation has made up a significant portion of the recent
employment growth, a shrinking labor force could only account for a fraction of
the decline in unemployment.
--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com
[TOPICS: MAUDS$,M$U$$$]