NFP Preview: Forecasts from seven major banks, losing momentum

We expect a 150K gain for September and see the unemployment rate ticking higher to 3.9%, with earnings growth still at +0.2%.

We forecast job growth of 160K. After the surprisingly sharp rise from 3.5% to 3.8% in August, the unemployment rate is likely to have fallen again slightly to 3.7%, as the trend in labor force growth is only around 100K. We do not expect the unemployment rate to rise significantly until next year when the economy is likely to slip into recession and employment is likely to shrink.

Hiring could have accelerated in the month if previously released soft indicators such as S&P Global’s Composite PMI are any guide. Layoffs, meanwhile, may have decreased slightly judging by the decline in jobless claims between the August and September reference periods. With these two trends reinforcing each other, we expect job creation to have accelerated to 200K in the month. The household survey could show a similar gain, a development which would translate into a one-tick decline of the unemployment rate to 3.7%, assuming the participation rate slipped one tick to 62.7%.

The next round of US payroll employment data will likely show the unemployment rate holding steady at 3.8%, and employment up by 177K, slightly below the 187K add in August. Labour market conditions remain tight with initial jobless claims trending at low levels. But signs of slowing demand including falling job openings mean we can continue to expect conditions to slow.

We expect more of what we’ve seen over past six months: a gradual weakening of job growth and further evidence of a slow but steady rebalancing of the labour market. The unemployment rate and the participation rate should hold at 3.8% and 62.8% respectively. 

We expect NFP to rise by a strong 240K in September, partly reflecting the reversal of seasonal issues that led to a softer 105K increase in June (which has been revised lower from an initial 209K). Average hourly earnings should rise 0.3% MoM, although with upside risks of a print that rounds to 0.4%. This would reflect a rebound in wage growth from a modestly softer increase in August. Meanwhile, we expect the unemployment rate to decline back to 3.6% in September after an unexpected increase to 3.8% in August. The increase in August was largely due to a rise in the participation rate, which increased from 62.6% to 62.8%.

We forecast that the US economy added 150K jobs in September, a step down from 187K in August. Looking beyond payrolls, we anticipate that the labor force ebbed a bit in September after last month’s jump. If realized, this would nudge the unemployment rate a tick down to 3.7%. Meanwhile, the trend in average hourly earnings growth continues to gradually ease as turnover settles down and the supply and demand for labor have moved toward a better balance. We estimate that average hourly earnings growth picked up slightly to 0.3% in September, although that would be enough to push down the three-month annualized pace of wage gains below 4%.