REPEAT: MNI DATA PREVIEW: See Healthy Payrolls Post-Storms

Repeats Story Initially Transmitted at 14:50 GMT Dec 7/09:50 EST Dec 7

By Sara Haire and Holly Stokes

HIGHLIGHTS: 

- Nonfarm payrolls to normalize with a 200,000 gain after large swings in the

previous two months due to the hurricane-impact.

- A tendency to underestimate November payrolls could lead to a

larger-than-expected gain this month.

- Unemployment expected to stay at 17-year low 4.1%, a possible concern for Fed

officials.

- Average hourly earnings to start gradual rise with +0.3%, analysts hopeful

this may signal wages "catching up" to tight labor market.

- Private payrolls to see a strong 194k gain. 

     WASHINGTON (MNI)- November nonfarm payrolls are expected to return to trend

with a 200,000 gain following the hurricane-distorted employment data in

September and October, with private payrolls contributing 194,000. 

     The unemployment rate is expected to stay at the 17-year low 4.1%, while

the median forecast for average hourly earnings is a 0.3% increase, with

analysts forecasting a large range. 

--PAYROLLS RETURN TO TREND

     Following the disruption to payrolls due to the hurricanes, analysts agree

that November payrolls should be moving closer to trend. While growth is

expected to be slower than October's rebound, analysts at Barclays expect the

month to post a solid gain, falling in line with the average and keeping the

unemployment rate steady.

     Analysts have forecasted lower than the actual value six out of the last

eight Novembers, so there is a good chance that the headline number could come

in stronger-than-expected. The average of the last five Novembers is a 212,000

gain, so the median estimate would be on trend. 

     If analysts are correct, November should move the year-to-date average up

to 175,000, compared to the year-to-date through November 2016 of 181,000.

Taking out the last two distorted months of payrolls, and assuming a 200,000

gain for November, the year-to-date average would be 188,000, which would be

slightly above trend from the previous year. 

--PAYROLL INDICATORS: A CLOSER LOOK

     According to Morgan Stanley, there should be fairly broad-based gains

across industries. However, given the slowdown in regional Fed manufacturing

surveys for November, they expect a softer gain for manufacturing payrolls.

     Analysts disagree on how retail will fare. Societe Generale expects

softening, but Goldman Sachs argues holiday hirings most likely occurred prior

to the survey week due to the early Thanksgiving. 

     The Consumer Confidence survey also supports strong hiring, as those

thinking jobs are "plentiful" rose to 37.1% from 36.7%, while those claiming

jobs are "hard to get" saw a slight decline to 16.9%. 

--LOW UNEMPLOYMENT

     Last month, the unemployment rate slipped to 4.1%, a 17-year low, due to a

large drop in the labor force, which brought participation rate down to 62.7%.

While sharp drops have typically held during recovery, the surrounding hurricane

volatility casts potential doubt on whether this low level can be maintained. 

     However, Capital Economics, in line with the median estimate, argues that

unemployment should be able to maintain this 4.1% level if both the household

measure of employment and the labor force growth rates normalized in November. 

     Not worried that last month's decline was hurricane-driven, some analysts

even believe that unemployment could slip to 4.0%. They base this estimate on a

combination of high labor confidence, low unemployment claims, and a rounding

effect. 

     If unemployment continues to trend low, this could further concern Fed

officials that the tight labor market will allow for a more extreme swing in

wage growth. Similarly, given that a 4.1% unemployment rate was what FOMC

members projected for the end of 2018, Barclays believes that this could give an

upside risk to the two-hike baseline outlook for 2018. 

--GRADUAL GROWTH IN EARNINGS

     Despite expectations for a continuingly tightening labor market, analysts

continue to hold their breath on significant wage pressures. Last month's flat

reading was the result of a return from a hurricane skewed labor force, but

analysts are now mixed on just how much wage growth will have strengthened in a

normalizing November - with estimates ranging from 0.1% to 0.4% gains. 

     Ignoring the hurricane noise of October and September, hourly earnings

averaged a 0.2% monthly rise this year, and the median forecast would put

earnings at a slightly higher 0.3%, as the average workweek holds steady at

34.4. If a 0.3% increase in hourly earnings is realized, this would lift annual

growth from 2.4% to 2.7%. 

     Though a 0.3% increase in hourly earnings does not represent the full

"catch up" to a tightening labor market, some analysts are optimistic that wages

should soon begin to accelerate, with November a potential start to this upswing

and further evidence that inflation rising truly is around the corner.

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

--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com