Banks NFP forecast and rate hike expectation


 3 June, AtoZForex, Lagos – As markets brace up for the May non-farm payroll reports, we have here banks NFP forecast and rate hike expectation. We are focusing on the forecast of the research teams at RBS, SEB and BofAML. These banks have again released their expectations, which have been particularly interesting. Last month, payroll growth surprised to the downside but more hours worked and robust wage growth were positives.

Banks NFP forecast and rate hike expectation

BofAML NFP forecast

In the May employment report, the bank expects nonfarm payroll growth of 160,000, which would be a subdued pace relative to the prior 3-month trend of 200,000. That said, they further added that:

job growth will be depressed by ongoing Verizon labor strike. Accounting for this distortion, the labor market would still be improving at a healthy clip. With a softer increase in employment, the unemployment rate likely held at 5.0%. This is the last employment data heading into the June FOMC meeting. If the data comes in as expected, we anticipate a June rate hike would remain on the table but it is not our base case.

RBS NFP forecast

RBS bank expects a modest pickup in the pace of US employment growth, compared to April.

“Both overall and private payrolls will be reduced by nearly 40,000 as a result of striking Verizon workers (a “special factor” the Fed will look through). Taking that drag into account, we look for payrolls in May to have increased by 170,000 (i.e. excluding the Verizon strike, our forecast would be +210,000), and we look for private payrolls to have advanced by +160,000 (i.e. +200,000 ex-Verizon). While these results would arguably meet the threshold for action in June, policymakers may still choose to wait for more information on inflation trends and the outcome of the UK vote before acting.”

SEB NFP forecast

The SEB also opines that the Verizon strike could depress the headline with as much as 40k. Further stating that:

With respect to May employment growth, assuming unchanged readings on the two ISM employment indexes in May, our indicator model is suggesting a 150k advance in total employment growth which is our forecast. Given that the participation rate holds steady the unemployment rate should decrease to 4.9%.

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