Everyone knows not to care about the actually “unemployment rate” because that goes up and down based on labour force participation.
And tomorrow you can’t look at the headline number because the Census is laying off workers, meaning we’re almost certain to see a reduction in jobs.
So it all comes down to private payrolls. According to MNI, economists are looking for the net creation of 100K new jobs.
Deutsche Bank, meanwhile, foresees a gain of 150K.
Some analysts are speculating that the Fed could issue a policy directive regarding this matter at next week’s meeting. We do not think this will be the case unless the July employment news is considerably weaker than we forecast.
We project private payrolls to increase +150k compared to an average of +99k/month in H1. Given concerns among some Fed officials that the US will experience another “jobless recovery”, if July private payrolls are weak, then there will be a decent chance officials move to reinvest maturing securities at the upcoming meeting—in order to convey the sense officials are doing something to help the economy gain traction.
The amount of reinvestment over the intermediate term will not be of sufficient size to meaningfully impact rates in the Treasury market, so we would not be inclined to alter our economic forecasts based on a marginally more accommodative stance from the Fed. An alternative would be for the Fed to offer assurance the current stance of interest rates will remain in place for a more specific period of time—something the Chairman alluded to in recent testimony. While it may be more controversial among some hawkish policymakers; the “extended period” timeframe could be quantified more explicitly (e.g. several more months, a few quarters, etc.)—or it could be tied more closely to a data pre-condition (e.g. unemployment/core inflation reaching certain thresholds). –JL & CR
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