Thursday is jobs day in America.
Instead of the usual first Friday of every month, we’ll get the jobs report on Thursday due to the Independence Day holiday the day after.
Markets will momentarily shift attention from Greece at 8:30 a.m. ET, when the Bureau of Labour Statistics releases data on the pace of jobs and earnings growth in June.
May was huge. Nonfarm payrolls grew by 280,000, compared to the forecast for 226,000, although the unemployment rate ticked up to 5.5% from 5.4%.
Economists anticipate that Thursday’s data will show a slowdown in the pace of jobs creation month-over-month.
Here’s what Wall Street is expecting, according to Bloomberg:
- Nonfarm payrolls: +233,000
- Unemployment rate: 5.4%
- Average hourly earnings, month-over-month: 0.2%
- Average hourly earnings, year-over-year: 2.3%
- Average weekly hours worked: 34.5
After the economy unexpectedly contracted in the first quarter — with the final reading of gross domestic product at -0.2% — the surge in payroll gains last month was a relief to economists.
In an email to clients on Wednesday, Citi’s global head of G10 FX Strategy Steven Englander wrote that the big payroll gains last month were “half payback” for the weaker prints recorded earlier this year.
And so, the forecast of 230,000, although a slowdown, is a steady expectation.
Barclays economists also highlighted, in a preview on Wednesday, that the rise in payrolls last month was catch up for the slower pace of hiring.
Arguing for a jobs report above expectations, Goldman Sachs’ David Mericle wrote that employment components of the ISM manufacturing report, and various regional Federal Reserve surveys, were stronger month-over-month.
Also, jobs growth in the manufacturing sector has recently improved.
Goldman’s forecast is below consensus, at 220,000. They noted that a decline in online job ads, and a rise in initial jobless claims during the survey week of the jobs report, could make for a weaker report.
The unemployment rate is expected to hold steady month-over-month, after climbing in May.
Citi’s Englander noted that if the unemployment rate rises again, it will be the first time since late 2012 when the rate rises for two straight months. However, as we wrote last month, the unemployment rate climbed in May for good reason: The civilian labour force also grew, by 397,000.
Along with the increase in the number of jobs was wage growth, a crucial ingredient that had not been plentiful in the economy. Economists anticipate an unchanged reading month-over-month.
Several of the regional Fed manufacturing surveys continued to contain anecdotes of wage pressures from business leaders.
The Federal Reserve is glued to incoming economic data in determining when, or whether, to hike interest rates this year.
Thursday’s data will give investors more clarity on whether the Fed will remain confident that it can raise rates at some point in 2015.
Consumers, for their part, are feeling great about the economy.
The latest reading on consumer confidence from the Conference Board came in at 101.4, well ahead of the forecast for 97.4.
Equally interesting was the fact that the share of people expecting more jobs in the next few months increased to 17.8% from 14.7%. The share of people expecting higher wages was unchanged.
And so, as economists bet on either a September or December rate hike, the most recent prints on payrolls and wage growth suggest that the Fed may be at a tipping point.
“It is only the Fed who thinks there is some kind of slack out there in the economy, although they have no data to lean on, nothing to support this pessimistic assessment of current labour market conditions on their part,” Bank of Tokyo-Mitsubishi’s Chris Rupkey wrote.