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US Payrolls could surprise to the upside – Danske Bank

FXStreet (Edinburgh) - Analysts at Danske Bank expects the US labour market to keep improving on Friday, with Payrolls coming at 266K and the jobless rate down to 6.1%.

Key Quotes

“We look for a positive surprise in Friday’s job report with a solid increase in nonfarm payrolls of 260,000 (consensus 225,000). We also expect a drop in the unemployment rate of 0.1 percentage point to 6.1% (same as consensus)”.

“Wage growth will also be in focus in Friday’s report. Most data point to reduced slack and the time to fill vacancies has accelerated recently to the highest level since the series began in 2000. So far actual wage growth has remained subdued but it seems wage pressures are gradually building”.

“Increases in non-farm payrolls are averaging 244,000 m/m over the six months and above 200,000 m/m within the last year”.

“Despite the positive tendencies of several key figures, a range of other labour market indicators suggests that there remains significant underutilisation of the labour resources as stated in the latest Fed statement”.

“As the unemployment rate has moved closer to the Fed’s estimated natural level of 5.4%, the attention turns towards utilisation indicators and the development of these will be crucial for when the Fed will start raising the short-term rates”.

“We expect payrolls to grow around 250-300k in coming quarters and unemployment to hit the NAIRU rate of 5.4% in Q2 next year. Based on this we look for the Fed to deliver the first rate hike in April 2015”.

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