After the weakest jobs report in six years last month, the June data, due on Friday, are expected to show that the US labour market is not rolling over.
Bank of America Merrill Lynch has called it the most important employment report of this year.
Via Bloomberg, here’s what Wall Street is expecting:
- Nonfarm payrolls:+180,000
- Unemployment rate: 4.8%
- Average hourly earnings month-on-month: +0.2%
- Average hourly earnings year-on-year: +2.7%
- Average weekly hours worked: 34.4
May’s report showed a gain in nonfarm payrolls by just 38,000.
About 35,000 Verizon workers were on strike during the reference week for the jobs report.
This dragged down the three-month moving average job gains — a better gauge of the underlying employment trend that smooths out month-to-month variation — to its lowest level since July 2012. Even adding back the striking Verizon workers to the count of payrolls left jobs growth during May at a four-year low too.
It’s now up to the June jobs data to calm worries about the labour market.
But remember that May was just one month’s data, and is subject to revision. Other labour-market indicators like initial jobless claims and the number of job openings are not showing a hiring slowdown.
Also, the ISM non-manufacturing index — a monthly reading on the services sector — showed that employment rebounded in June from contraction in the prior month.
These seemingly conflicting data are why the Federal Reserve agreed that the last report increased its uncertainty about the labour market, but was still divided about the jobs data, as Bank of America Merrill Lynch’s Ethan Harris and team said in a note. For example, “some” participants said other labour-market indicators “did not corroborate a material weakening of labour market conditions,” but some “others” thought it might hint at “a broader slowdown in growth.”
Their uncertainty means the data-dependent Fed is likely to hold its fire on raising rates again until at least December, Harris said.
Economists are betting that wages would rise 0.2% month-on-month, taking the year-over-year gain to 2.7%, the highest of this cycle.
“A rebounding hiring performance, coupled with a pickup in earnings growth, would go a long way towards easing concerns that the US economy had hit a soft patch,” said Wells Fargo economists in a note on Wednesday.
It’s expected that the unemployment rate would inch up from a cycle low of 4.7% to 4.8%.
The rate fell in May because fewer people actively looked for work — a trend captured by the labour force participation rate, which declined to a year-to-date low of 62.6%.
Its decline has been driven in large part by the number of baby boomers who are retiring, but a higher rate would show more people are being drawn to the workforce.
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