Ahead of tomorrow's nonfarm payrolls report, labor market proxies have been mixed in June: as Newsquawk notes, initial jobless claims spiked in the comparable survey week, with the four-week moving average higher heading into the June data; within S&P Global’s flash PMI data, the employment sub-indices eased, though remain above the 50-mark, which separates expansion and contraction; the ISM manufacturing data saw employment fall into contraction, but the services gauge saw the employment index rise into expansion; ADP’s gauge of payrolls growth spiked higher in the month, while Challenger Layoff numbers tumbled lower. Currently, markets are expecting the Fed to lift rates in July, and only a very significant miss along with weakness in other metrics will derail that plan; meanwhile some of the strong data released this week has seen expectations of the Fed terminal rate rise, to 5.45% in November 2023.
NONFARM PAYROLLS GROWTH EXPECTED TO SLOW:
PROXIES:
UNEMPLOYMENT EXPECTED TO EASE:
The unemployment rate is seen falling by 0.1ppts to 3.6% in June. Analysts note that the jobless rate is likely to decline due to the reversal of the fall in household employment seen in May, but a gradual increase is expected in the second half of the year. The Fed’s most recent economic projections released last month showed officials expect the jobless rate to rise to 4.1% by the end of this year, and then to 4.5% next year. If the unemployment rate does slip, traders will look to the participation rate, which has been stable in recent months; the metric has remained at 62.6% for the last three jobs report; a higher reading indicates that more people are entering the labor market. Meanwhile, the U6 measure of underemployment – which measures the percentage of the US labour force that is unemployed, plus those who are underemployed, marginally attached to the workforce, and have given up looking for work – has been between 6.6-6.7% in the last three months.
EARNINGS:
POLICYMAKER FOCUS:
ARGUING FOR A STRONGER THAN EXPECTED REPORT:
ARGUING FOR A WEAKER THAN EXPECTED REPORT:
NEUTRAL/MIXED FACTORS: