US nonfarm payroll employment to pick up to a 165k pace in April - TDS

Analysts at TDS expect April nonfarm payroll employment to pick up to a 165k pace after a disappointing 98k advance in March.

Key Quotes

“The weak March print was partly related to adverse weather effects in our view, hence we expect job growth to rebound consistent with labor market indicators through April (survey employment measures, the Conference Board job differential and jobless claims). But we see limited upside this month as we believe a slower pace of job growth is gradually emerging, consistent with nearing full employment. Data in the past week is also supportive of our below-consensus call; in particular we take note of the ISM non-manufacturing employment print, which held at levels consistent with gains closer to 100k.”

“By industry, we expect the manufacturing and mining sectors to continue to contribute positively to job growth, while construction jobs should bounce back after a likely weather-induced slowdown in March. Private services jobs, which slowed to a sub-par 61k increase in March, are expected to rebound back to its recent trend.”

“The unemployment rate is expected to correct slightly to 4.6% after hitting a new cycle low of 4.5%, in line with a likely pullback in household employment paired with some stabilization in unemployed workers. We also look for a strong 0.4% m/m increase in average hourly earnings in April, partly reflecting upward bias from calendar effects. That would leave the year-on-year pace unchanged at 2.7%, with a risk that it could round to 2.8%.”

“Foreign Exchange

We do not view our below-consensus forecast for payrolls growth as significant enough to undermine the USD. Indeed, should strong wages be realized, we think the USD could catch a bid as the market might re-price the Fed’s path further out the curve. We see tactical support in USDJPY towards 113.30/50 and EURUSD support towards 1.0820/50 to be tested, at which point we would consider fading.”