Societe Generale economist Brian Jones is super bullish on Friday’s jobs report.
Jones expects US payrolls grew by 305,000 while the unemployment rate fell to a six and a half year low of 5.6% in December.
Wall Street expectations are for Friday’s report to show payrolls grew by 240,000 in December as the unemployment rate is expected to fall slightly — to 5.7% from 5.8%.
Jones and his team expect the report will show that, “hiring continued at a breakneck pace in December.” In November, the jobs report blew away expectations, with payrolls growing by 321,000 against expectations for gains of 230,000.
In a note to clients ahead of the report Jones writes that the following factors lead the firm to call for another “eye-catching print” in Friday’s report:
- At 299,000 over the four weeks leading up to the December establishment survey period, the average number of persons filing initial claims for jobless benefits remained below the 300,000 mark for a fifth straight month — the first such occurrence since 2000.
- The breadth of job gains across the 278 industries canvassed by the BLS remained near expansion highs over the September-November span, while private December surveys revealed little slippage from their prior-month results.
- Real activity as measured by the Aruoba-Diebold- Scotti Business Conditions Index remained well above average last month.
- On the weather front, conditions were both considerably warmer than normal over the first two weeks of December and drier than is typical for that portion of the year.
- Our forecast assumes that 115,000 persons could not work because of bad weather in the household survey — 65,000 below the average posted over the past ten years.
Jones also expects the October and November reports will be revised higher.
And while payrolls gains have come in at more than 200,000 for the last ten months, the missing piece of the labour situation is wage growth, the one piece of the report Jones expects will disappoint.
Jones expects nominal wages grew just 0.1% month-on-month in December after a 0.4% rise in November. Consensus is for wage growth to come in at 0.2% month-on-month.