MNI DATA PREVIEW: US July Payrolls Forecast +163k, Risks Mixed

By Kevin Kastner, Brooke Migdon and Alexandra Kelley

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

expect July nonfarm payrolls to rise by 163,000, a smaller gain when compared to

the 224,000 rebound in June after the softer May reading.  While Hurricane Barry

hit at the end of the survey period, analysts expect little impact on the

payrolls numbers.

     Some analysts see a ramp-up of government hiring in preparation for the

2020 Census as a positive factor that could appear in the July data and the

months going forward. 

     ADP employment data released on Wednesday showed an increase of 156,000

nonfarm private sector jobs, coming in very close to the expectations of

analysts for a 153,000 gain in BLS's private payrolls after the 191,000 increase

in the BLS data in June. 

     Analysts in the MNI survey also expect average hourly earnings to rise by

0.2% after a 0.2% gain in June, the average workweek to remain at 34.4 hours,

and the unemployment rate to hold steady at 3.7%.

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

attention. 

     - ADP reported a gain of 156,000 in July, in line with expectations for a

153,000 gain in private payrolls. The ADP report tends to deviate from the

actual BLS payrolls number by a wide margin, missing by an average of about

65,000/month over the last year. Even taking that into account, the private

payrolls estimates outstanding would appear to be on target if ADP is to be

believed.

     - The ISM Manufacturing Employment Index fell in July, slowing to near

three-year low 51.7 after posting a 54.5 reading in June -- a negative sign for

upcoming payrolls. However, the Conference Board measures released on Monday

hinted at a stronger July payrolls report, climbing to a 46.2 reading following

a slowdown in June. Likewise, the level of initial claims was little changed

from the previous month's survey week while continuing claims fell sharply, also

positive. 

     - In the last 20 years of data, analysts have been roughly split between

underestimates and overestimates, with an even split over the last 10 years, so

there is no clear bias based on past forecast data. 

     - Retail payrolls have declined in each of the last four months and show

little signs of improvement in the near future. The retail sector continues to

lead all industries in job cut intentions in 2019, cutting 55,167 jobs in seven

months, according to a report released by Challenger, Gray and Christmas Inc. on

Wednesday. 

     Additionally, a sustained shift away from brick and mortar businesses in

favor of online retailers has been driving physical sales down, with department

stores posting a 1.1% decline in July while the sales of non-store retailers

increased by 1.7%. 

     - Hourly earnings are expected to post a 0.2%, the same rate of growth,

maintaining a recent trend. However, the timing of the payday 15th of the month,

which was part of the survey week in June but not in July, adds some downside

risk for July. The forecasted value would keep the year/year rate at 3.1%, well

ahead of the 2.8% rate a year ago, but down significantly from the 3.4% rate

seen as recently as February.

     - Coinciding with the weakness of the ISM Manufacturing Employment Index,

the regional data overwhelmingly pointed to a weak manufacturing hiring in July

after a 17,000 gain in factory payrolls in June.

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

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

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

[TOPICS: MAUPR$,M$U$$$]