US NFP preview: We expect another soft report - Wells Fargo

Analysts from Wells Fargo, expect a soft May employment report (Friday) but they explain that the unemployment rate can continue to decline even in the face of more modest job gains.

Key Quotes:

“Nonfarm payrolls rose by 160,000 in April, a downshift from the 208,000 jobs added in March. The unemployment rate remained stable at 5.0 percent as the labor force participation rate fell to 62.8 percent from March’s 63 percent share. We expect the pace of job growth to begin to downshift this year, although last month’s reading was still disappointing, in our view.”

“The current pace of labor force growth suggests that the unemployment rate can continue to fall even in the face of more modest monthly job gains. Looking ahead to May’s employment report, we expect another soft report with nonfarm payrolls rising by 125,000 with the unemployment rate falling to 4.9 percent.”

“Our call for a disappointing May employment report is based on our expectation of a sizable impact from a worker strike in the telecommunications sector. We suspect the strike will subtract 40,000 jobs from the May report reflecting the number of workers affected by the strike.”