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REPEAT: US DATA PREVIEW: July Jobs Seen +181K; Analysts Differ

Repeats Story Initially Transmitted at 18:42 GMT Aug 3/14:42 EST Aug 3
By Holly Stokes and Sara Haire
     WASHINGTON (MNI) - The median forecast in an MNI survey of analysts expect
July's nonfarm payroll growth to remain strong, posting an increase of 181,000,
but most do not believe it can keep pace with June's spike of 222,000.
     Analysts remain mixed on just how much weaker July will be, reporting a
range of forecasts from 169,000 to 220,000. Indicators for payroll growth remain
strong, with jobless claims near record lows, and ISM Manufacturing and
Nonmanufacturing remaining well above the 50 benchmark. Despite these strong
indicators, forecasts remain below June's 222,000 reading and well below last
July's recorded 291,000 rise in non-farm payrolls that surprised to the upside. 
     Despite the positive news leading into the report, some analysts are
concerned that June's stronger-than-expected gain could trim July's headline
number.
     Barclays states that July's numbers will be the first "clean" report since
April, with May and June skewed by a surge in the teenage labor force. Others,
like CIBC, emphasize that payrolls could be below consensus due to reports of
increased difficulty for businesses to find skilled labor. However, Goldman
Sachs questions if seasonality may still play an unaccounted role, noting that
July's payroll has risen by more than 200,000 in the past three years -
suggesting a not yet accounted for shift in seasonality, and thus an above-trend
job growth. 
     Private payrolls are expecting to post a 185,000 gain, a slight drop from
June's 187,000 rise. This forecast is above the 178,000 gain in private payrolls
reported by ADP on Wednesday morning, but well below the gains seen in previous
July's. This unaccounted shift in seasonality that Goldman Sachs mentioned could
play a factor in private payroll growth, as the original ADP number has been
underestimated by more than 50K for the month of July since 2015, suggesting
there could be another large revision for July of 2017. NatWest explains that
the average for the first half of 2017 sits at 171,000, which is in line with
the 2016 average, and is more than enough to keep up with population growth and
will put downward pressure on the unemployment rate.
     After a small uptick to 4.4% unemployment in June from a surge in the labor
force, analysts agree that July's unemployment rate should return to 4.3%. Yet,
analysts remain divided as to whether there is a labor shortage. RBC states that
with a labor-backdrop at a 16-year high, there should be a rise in people
reentering the labor force, and analysts note the summer surge of teen labor.
However, others point to business responses stating an increased difficulty to
fill open positions. 
     As reported in MNI's Reality Check on Thursday, recruiters spoke to the
need for pay hikes, bonuses, or benefits packages to entice new employees, or
simply to retain current employees in a competitive market. Additionally, the
NFIB Jobs Report showed that 35% of small businesses were unable to fill open
positions-a high since 2001. That being said, the U-6 rate shows it has been
hovering in the 8.6% range, down from 9.6% last June, which could mean those
searching for full-time positions are continuing to find them. 
     With possible labor shortages, analysts expect a 0.3% increase in average
hourly earnings, but, due to strong base effects, YoY hourly earnings will fall
to 2.4% from 2.5% in June. And as NatWest states, this will lead policymakers to
continue to question why, despite the unemployment rate declining, YoY growth in
hourly earnings has dipped since December's 2.9%. As discussed in MNI's Reality
Check, recruiters across the country are mixed as to the continuance of wage
growth -- with a recruiter in New York stating that July's increase in wage
offerings was the largest he'd seen, while a recruiter in California discussed
signs of employers nearing their pay limits, and pushback to wage growth.
--MNI Washington Bureau; tel: +1 202-371-2121; email: kevin.kastner@marketnews.com

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