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Look for wage inflation to support Fed hike for NFP's - Deutsche Bank

FXStreet (Guatemala) - Analysts at Deutsche Bank noted that US data is pointing towards a positive Nonfarm Payrolls number.

Key Quotes:

"The October ADP employment survey (182k vs. 190k previously) was modestly above our 150k forecast. However, we continue to expect a 175k gain on headline nonfarm payrolls (150k private) when the data are released this Friday."

"Recall that the ADP survey has over- estimated the initial change in private nonfarm payrolls in three out of the last four months and over the past year, the median absolute difference between the initial ADP print and private nonfarm payrolls has been 50k."

Within the details of the ADP survey, construction payrolls (35k vs. 34k) showed the largest gain since February 2006 (38k), which highlights the sturdy trend in the sector. In contrast, manufacturing hiring (-2k vs. -17k) remains soft. This is consistent with the weakness in the employment subcomponent of the manufacturing ISM survey. Service-sector hiring (158k vs. 182k) drifted lower, and the October increase was the smallest since January 2014 (134k). The professional and business services (13k vs. 31k) category was particularly soft, as the October gain was the smallest since February 2010."

"To be sure, the modest deceleration in ADP services hiring was somewhat mitigated by the strong October nonmanufacturing ISM (59.1 vs. 56.9). The employment subcomponent of the latter (59.2 vs. 58.3) remained near its post- recession high reached last July (59.6)."

"There has been an increasing divergence between the employment subcomponents of the manufacturing and nonmanufacturing ISM surveys. At present, the spread between the two series is the second largest on record. History is unclear on how this divergence will be reconciled."

"Thus far, there is little indication that the weakness in the manufacturing sector is spilling over into other parts of the economy (yet). In general, while steady October and (possibly) November employment data will be key for Fed policymakers who have signaled the potential for liftoff at the December meeting, we will also need to see evidence that inflation will firm. Thus, decent payroll growth may not be sufficient if it is not accompanied by some signs of rising wage pressures."

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