NBC Economics and Strategy report that U.S. nominal personal income rose 0.4% in July, double expectations, while spending increased 0.2% and real disposable income climbed 0.4% with flat real spending. They expect August nonfarm payrolls to rise by about 80K, keeping unemployment at 4.1% as participation edges up, and note PCE inflation holding at 3.7% headline and 3.3% core.

Income, jobs and PCE inflation

“After advancing 0.2% in June, nominal personal income rose 0.4% in the United States in July, surpassing the median economist forecast calling for a +0.2% print. Nominal personal spending, for its part, grew 0.2% in the month, led by a 0.6% gain in the services sector. After adjusting for inflation, disposable income rose 0.4%, while spending was flat.”

“Still in the U.S., the headline PCE deflator in July printed at 3.7% on a 12-month basis, unchanged from the prior month and one tick above consensus expectations (3.6%). The 12-month core measures also stayed unchanged, at a consensus-matching 3.3%. On a monthly basis, both the headline and the ex-food and energy indices moved up 0.2%.”

“In the U.S., the release of the August nonfarm payroll figures is expected to attract considerable attention. Based on the decent weekly data released by ADP and previously published “soft” employment indicators, such as S&P Global’s flash composite PMI, job creation likely rebounded in the month. Layoffs, for their part, may have remained very limited, judging by the extremely low number of initial jobless claims.”

“These two factors combined should, in our view, result in an increase of 80K in nonfarm payrolls. The household survey could also show a healthy gain which should, however, leave the unemployment rate unchanged at 4.1% if, as we anticipate, the labour force participation rate rose by one-tenth to 61.5%.”