Investing.com — The overall jobs market in the U.S. has remained robust over the past year, according to analysts at Wells Fargo, as investors look ahead to the release of June’s nonfarm payrolls report on Friday.
In a note to clients earlier this week, the analysts said that average expansion of 230,000 in monthly nonfarm payrolls — a key measure of labor demand — has “buck[ed] expectations for a sharp slowdown in the wake of the series of interest rate hikes by the Federal Reserve.
They noted that an “outsized share” of these gains has been concentrated in three areas: Healthcare, government and leisure and hospitality. These industries, the analysts said, have either lagged a broader post-COVID-19 recovery in the labor market or been “more insulated” from the Fed’s monetary policy tightening campaign.
“These sectors’ ability to plow ahead with hiring has offered an important source of support to income growth and consumer spending growth,” the analysts said.
They added that, on a net basis, they expect the three categories to continue to provide a “sizable lift” to the monthly rate of payroll increases “that surpasses their pre-pandemic contribution and helps keep payroll gains afloat despite the current weight of monetary policy.”
However, the Wells Fargo analysts predicted that the boost from these industries will be “smaller” as “the gap between each of these industries’ recent run-rate and their pre-COVID pace is likely to narrow ahead amid less scope for catch-up hiring, a less robust financial position and/or slowing demand.”
As such, the likelihood that payrolls growth “slows more meaningfully ahead” is increasing, they said.
“We look for [nonfarm payroll] gains to downshift to about a [150,000] monthly pace over the next 12 months amid a smaller contribution from recent industry standouts and diminishing appetite for employers to hire more broadly,” the analysts estimated.
