US: What’s a good print for payrolls? – Wells Fargo

Research Team at Wells Fargo, notes that the nonfarm payroll growth has slowed in 2016 compared to the breakneck pace of the past two years.

Key Quotes

“The slowdown has some market watchers concerned that the economy is losing steam. In this report, we estimate the number of jobs needed to keep the unemployment rate steady and employ that estimate as a benchmark for a “good” payrolls number. The bottom line is that fewer jobs are needed today to hold the unemployment rate steady.

While demand for labor drives hiring in the short term, labor supply is the key driver of job growth over the long term. Weaker population growth and a decline in labor force participation, brought about by an aging workforce, point to a lower trend rate of employment growth over time. We estimate that nonfarm payrolls will need to rise by 70,000-100,000 per month between now and the end of 2020 in order to keep the unemployment rate stable. This is a lower threshold than previous cycles, when the trend rate of job growth averaged around 150,000 in the 1990s and 120,000 in the early 2000s. The slowdown in job growth since the start of the year therefore indicates that while slack is not declining as quickly, it is still plenty strong enough to lead to a tighter labor market.”