Increase in the US non-farm payrolls is expected to have come in lower in July in comparison to the huge rise seen in the previous month. Alterations in non-farm payrolls are quite volatile and therefore June’s large rise just partially counters April’s and May’s weak jobs reports, as the three-month average monthly rise in non-farm payrolls in June was just slightly lower than 150,000.
“We estimate non-farm payrolls rose 175,000 in July in line with consensus of 180,000, both significantly lower than the large increase in June of 287,000,” said Danske Bank in a research note.
In all, growth has levelled off in employment in 2016 as compared to the past few years, in spite of the firm report seen in June. This might suggest that there has been a slowdown in hiring and that the US economy is close to full employment, signifying that employment has become quite expensive and is challenging to find employees with right qualifications, according to Danske Bank.
But there has not been a rise in growth in productivity as expansion in employment has decelerated along with subdued economic growth in the last three quarters. This is a cause of concern as it might signify that the underlying momentum in the US has decelerated. Therefore, the July jobs report will bring in much attention. A solid report might lower certain worries about the US economy’s current situation.
“We estimate average hourly earnings increased 0.2 percent m/m in July in line with the recent trend implying an annual growth rate of 2.6 percent”, added Danske Bank.
There is quite a fluctuation in average hourly earnings; however, a rebound in wage growth is seen in general since the start of 2015, as the labor market has continued to tighten. Nonetheless, wage inflation continues to be weak. The jobless rate in the US is expected to have stayed at 4.9 percent in July, noted Dankse Bank.
Service sector is likely to have continued driving employment growth in July, with jobs growth of 150,000. Private consumption continues to mainly drive the US economic growth, whereas non-residential investments continue to drop. Therefore, service sector employment is anticipated to continue rising steadily, whereas growth in manufacturing employment is likely to continue fluctuating around zero, stated Danske Bank.
