Wrightson ICAP: Stronger Payrolls Could = Weaker Inflation

Wrightson ICAP's 500k estimate is a little lower than consensus for November nonfarm payrolls, with their assumption being that "growth will be constrained mainly by the availability of workers rather than by a lack of employer demand."

• They note that a stronger-than-expected outturn could be counter-intuitively dovish for near-term inflation pressures as it "could very well indicate an easing of supply constraints".
• From an FOMC policy perspective, though Friday's figure could influence December's policy decision for some participants, Wrightson ICAP think "exactly how the payroll numbers should translate into a policy recommendation is very much a judgment call at present."
• They see a 0.2pp decline in the unemployment rate to 4.4% (reflecting a "pessimistic" 0.1pp increase in the participation rate to 61.7%) - "at some point, labor-force re-engagement should push that series higher, but we don’t expect any progress this month."
• They see average hourly earnings as being "the one series" in the report "with unambiguous policy implications" - and are in line with expectations with +0.4% M/M. The overall growth in AHE "is pretty clearly a sign of an overheated job market plagued by worker shortages."