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What’s expected:
- Consensus estimate +80K (range +10K to +140K)
- June +57%
- Private consensus estimate +78K
- Unemployment rate consensus estimate: 4.2% vs 4.2% prior
- Participation rate consensus 61.5% prior
- Prior underemployment U6 prior 7.9%
- Avg hourly earnings y/y exp +3.5% y/y vs +3.5% prior
- Avg hourly earnings m/m exp +0.3% vs +0.3% prior
- Avg weekly hours exp 34.3 vs 34.3 prior
July jobs so far:
- ADP employment report 44K vs 65K expected and +95K prior
- ISM services employment 47.4 vs 51.2 prior (four month low)
- ISM manufacturing employment 52.8 vs 50.0 exp and 49.7 prior
- Challenger Job Cuts 33,429 vs 45,849 prior
- Philly employment +10.0 vs +7.9 prior
- Empire employment +11.4 vs +9.6 prior
- Initial jobless claims survey week 187K (lowest since 1969) vs 226K prior
- Revelio Labs +79.2K vs +125.35K prior
In terms of seasonals, it’s very close to balanced for the July print, with both the headline and unemployment rate about a coin flip.
The market isn’t overly focused on jobs at the moment as there doesn’t appear to be a strong trend and the last number of months have been in a range that doesn’t cause concern. I think the market is leaning lower than the consensus after ISM services and ADP but I don’t think it’s particularly tradable, especially given USD/JPY intervention.
In terms of monetary policy, I think a Sept hike should be baked in but it’s only at 59%. A strong jobs report could add to that while I don’t think a weak one would hurt it particularly badly given the good numbers in the latter half of H1. If you’re the Fed, would you think that a Sept hike would derail the labor market?
In the aftermath of the report, the place to watch will be the Treasury market. Yields have been grinding higher without much fanfare. There has been a reprieve on hopes for a Hormuz deal but that’s a tough trade to life and die on.
Watch the wage numbers closely as even a 0.1 pp beat on the monthly number could tip the FOMC balance.
This article was written by Adam Button at investinglive.com.
