MNI 5 THINGS: US November Payrolls Seen +190k, But Upside Risk

     WASHINGTON (MNI) - The median forecast in an MNI survey shows analysts

expect November nonfarm payrolls to rise by 190,000 when they are released on

Friday, a smaller gain than the 250,000 increase in November, with a clear risk

of an underestimate. Analysts also expect average hourly earnings to rise 0.3%,

the average workweek to remain at 34.5, and the unemployment rate to hold steady

at 3.7%.

     Ahead of the release on Friday, we outline five themes for particular

attention.

--UPSIDE RISK TO PAYROLLS

     Historically, analysts have shown a tendency to underestimate headline

payrolls in the month of November. In the last 20 years, they have done so 11

times by an average of 43,000 and have overestimated nine times by larger

average of 86,556. Over the past 10 years, this tendency to underestimate has

been stronger. Analysts have underestimated seven times by an average of 42,286

and overestimated three times by an average of 115,333.

--MARKETS, ANALYSTS SIMILAR ON EARNINGS

     This month, both markets and analysts are predicting that average hourly

earnings will rise by 0.3%. In the last year, markets have missed this value six

times, with an even split between overestimates and underestimates, and have

been on target six times. When they overestimate, it is by an average of 0.13pp

and when they underestimate it is by an average of 0.12pp, indicating that a

miss in either direction this month would be by relatively the same size and

around 0.1pp. Comparatively, analysts have been on target five times and missed

seven times, with four overestimates averaging 0.1pp and three underestimates

averaging 0.13pp. Given that markets and analysts have not shown a tendency to

overestimate or underestimate over the last year, there is no clear risk for

their estimate of a 0.3% rise in average hourly earnings

--MARKETS MORE OPTIMISTIC ON PAYROLLS

     Like with average hourly earnings, both markets and analysts leaned toward

underestimating headline payrolls in the last year. This month, markets are

anticipating a 215,000 increase in the headline value, lower than last month's

unexpectedly large 250,000 gain, but above analysts' estimate for a 190,000

gain. In the last 12 months, both markets and analysts have overestimated five

times and underestimated seven times. Market overestimates averaged 61,600 while

analyst overestimates averaged a smaller 48,400. Their underestimates, at 40,286

and 37,000 respectively, are closer in value to each other. Given their tendency

to miss to the low side over the last year, markets and analysts could see an

upside surprise in this month's report.

--SOFT CLAIMS DATA DOWNSIDE RISK

     Although payrolls growth has been robust in recent months, initial

unemployment insurance claims ticked up throughout November, with the current

four week moving average at 228,000 compared with 214,000 at the end of

November. While the holiday season could temper the recent increase in claims

and send the average back down, this departure from trend is worth noting,

especially since the increase has been spread throughout the weeks of November,

as opposed to just being driven by one or two anomalous weeks. However, it is

also worth noting that continuing unemployment insurance claims were estimated

at 1.631 million in the last week of November, almost exactly where it was in

the last week of October, after a November high of 1.705 million.

--ADP IN LINE WITH FORECASTS

     On Thursday, the ADP Research Institute released their monthly employment

report, which reports hiring activity by ADP client companies. In November, the

ADP measure of private payrolls rose by 179,000, supporting analyst forecasts

for a 190,000 increase in November payrolls. It is important to note, however,

that the ADP measure and the BLS measure often miss each other by a wide margin,

since the ADP report only tracks data from client companies.

--MNI Washington Bureau; +1 202-371-2121; email: shikha.dave@marketnews.com

--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com

--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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