This Friday, the attention of traders will again be focused on the report on the number of people employed in non-agricultural sector of the US economy (Nonfarm payrolls). Figures released last month surpassed all expectations - 271K, which not only strengthen the US currency but gave an additional confidence to supporters of increasing key rates by the US Federal Reserve.
This time again, analysts do not predict the huge numbers of the indicator. Most inclined to believe that the figures point to the indicator mark of 180-200K. At the same time, the unemployment rate will remain unchanged at 0.5% and the level of wages will increase by 0.3%.
We believe that the NFP figures will be around 200K, while we share the view of other analysts on the growth of wages and the preservation of its former level of unemployment. Our forecast is based on a still strong US economic data, the continuing trend of declining global oil prices and the growing number of supporters of raising the Fed's key interest rate at the next meeting of the FOMC this month.
An additional factor in favor of the US economy, in our opinion, is high geopolitical risks in Europe and the continued weakening of the Chinese economy.
We believe that after the publication of Friday's release, the US dollar will have good reasons to strengthen its positions against all its main competitors, in particular the single European currency.
If the new NFP will be about 200K or more, the probability that the US central bank will increase interest rates in December this year will increase significantly. According to forecasts of US analysts, NFP figures will be about 180 thousand.
But even if the NFP numbers will show figures around 180K, it is unlikely to contribute to the weakening of the US currency, or to a decrease in the number of supporters of tighter monetary policy by the Fed.
What Skeptics Think?
In contrast to the majority, Danske Bank research team believes that on Friday we can expect a very significant reduction in the index of Nonfarm payrolls in the US compared to the previous month.
“Our models suggest jobs growth in November was around 175,000, which is below the consensus estimate of 200,000. The main explanation is that employment growth is somewhat volatile. Our trend employment growth models continue to suggest employment growth close to 200,000 per month, which is equivalent to the average employment growth so far this year. We estimate the unemployment rate was unchanged at 5.0%,” said Danske Bank experts.
Their pessimistic forecast is based primarily on the fact that significant numbers of NFP last month were mainly due to performance of the private sector and that the US macroeconomic statistics could be interpreted ambiguously. Nevertheless, even pessimistic experts believe that the trend will continue for the 200K in the next months.
Also, they share the same opinion with other analysts on rising wages and stable level of unemployment in the United States. The Danske Bank believes that even negative NFP figures would not stop the US Fed from raising its key interest rate this month.