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NatWest: U/E Rate Materially Above Consensus On Labor Differential Decline

US OUTLOOK/OPINION
  • NWM see NFP payrolls growth of 160k in August, revised down from 180k to incorporate the expected impact of the motion picture/screen actors’ strike, which is expected to reduce payrolls by around 15k-20k or so this month. Private is seen at 150k.
  • They see 0.3% M/M for AHE, leaving the y/y rate steady at 4.4% (but still well above the pre-pandemic pace of around 3.0%) and it is also possible that hours worked could be depressed by the strike, so they expect the average workweek to have stayed at 34.3 hours.
  • Those above points are close to consensus. However, they then see the u/e rate rising to 3.8% (cons 3.5 with some skew to 3.6) vs their earlier estimate of 3.5%. The change was influenced by the deterioration in the labor market conditions witnessed in the Conference Board's consumer confidence report on Tuesday. The net labor market differential fell from 32.4 in July to 26.2 in August for the weakest since April 2021).
  • If this report materialized they would view it as giving the Fed good reason to believe that overall trends in the labor market are beginning to downshift.
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