Heading into last month's jobs report, we were looking for a 15th straight month of beating the consenus but it fell just short at +209K vs +225K expected. Here is what to look for this time.
- Consensus estimate +200K (range +140K to +300K)
- Private +179K
- February +311K
- March +236K
- April +190K
- May +339K
- June +209K
- Unemployment rate consensus estimate: 3.6% vs 3.6% prior
- Participation rate prior 62.6%
- Prior underemployment U6 6.9%
- Avg hourly earnings y/y exp +4.2% y/y vs +4.4% prior
- Avg hourly earnings m/m exp +0.3% vs +0.4% prior
- Avg weekly hours exp 34.4 vs 34.4 prior
Here's the June jobs picture so far:
- ADP employment 324K vs 190K expected
- ISM manufacturing employment 44.4 vs 48.1 prior (lowest since July 2020)
- ISM services employment 50.7 vs 53.1
- Philly employment -1.0 vs -0.4 prior
- Empire employment +4.7 vs -3.6 prior
- Initial jobless claims survey week 228K vs 240K expected
This is a big showdown between the extremely strong ADP reading and the soft ISM services data. Note that last month the ADP data was also very strong at +497K but it didn't filter through into the government release. This month, the ADP reading was high once again but the ISM services and manufacturing numbers showed a deterioration.
Seasonally, July payrolls beat the consensus 54% of the time with the average of beats at +96K and the average of misses at -60K, according to BMO.
In terms of risk assets, a reading of somewhere around 100-150K would be ideal as it indicates some cooling without indicating a looming recession. A fall to sub +50K would set off some alarm bells about economic strength but could also be seen as positive because it would mean the end of the rate-hiking cycle.
What I wonder is how a negative reading would look. I'm inclined to see risk assets falling but there's a good argument that yields would fall on such a reading and that would be enough for risk assets. Moreover, it could still be seen as something of a one-off for the economy after many months of strong jobs gains.
For the FX market, it's far more straightforward for something like USD/JPY as something soft would lead to selling and something strong would lead to buying.
