Morgan Stanley sees jobs growth slowing; payrolls seen +210,000

Investing.com - The U.S. monthly jobs report is due for release on Friday, and investors will be keen to study this as they look for fresh indications on when the Federal Reserve might start to cut interest rates.

A consensus of economists polled expect the U.S. economy to have added 189,000 jobs in June, a drop from the larger than forecast gain of 272,000 the previous month.

Data released leading up to Friday’s important number has tended to show a cooling in the country’s labor market. First-time applications for U.S. unemployment benefits increased last week, while private employers in the U.S. added fewer roles than anticipated in June.

Morgan Stanley (NYSE:MS) is looking for a slightly stronger payrolls number than consensus, forecasting that payrolls slow to 210,000 in June.

This “reflects an interruption to labor supply and some softening in labor demand. Limiting labor supply, immigration flows slowed in March and remained slower in April and May after a year of strength. Hinting at softer demand, openings have fallen and new jobless claims have risen although continuing claims have not increased as convincingly,” according to analysts at the U.S. investment bank, in a note dated June 28.

The bank forecast no change in the unemployment rate at 4.0%, while average hourly earnings are seen rising 0.3% on the month, with growth slowing to 3.9% year-on-year.

“We expect slower employment growth in construction and leisure & hospitality because of restrictions in labor supply,” Morgan Stanley said.

“With the rise in claims, we also expect some softening in professional and business services employment. We also continue to wait for slowing in retail and transport; they've remained remarkably resilient even while retail sales have softened this year and job openings have come down. We also expect slightly slower education payrolls in June.”

The Federal Reserve kept interest rates unchanged earlier this month and pushed out the start of rate cuts to perhaps as late as December, as officials look for more convincing signs that inflation is pulling back to the central bank's target, or evidence that the labor market is cooling.

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