Expectations are for nonfarm payroll to rise by 700,000 after last month 559,000 increase

Tomorrow at 8:30 AM, the US Labor Department will release the June employment report.

The expectations are showing:

  • NFP 700K estimate versus 559K last month (expectations were for 645K last month)
  • Private payrolls are expected to rise by 600K vs 492k last month
  • Manufacturing jobs are expected to rise by 28K vs 23K last month
  • Unemployment rate is expected to to dip to 5.7% versus 5.8% last month (expectations 5.9%)
  • Participation Rate came at 61.6% last month
  • U6 unemployment rate was at 10.2% last month
  • Average hourly earnings are expected to increase by 0.4% versus 0.5% last month (expectations were for 0.2% last month
  • Average earnings YoY is expected to rise to 3.7% from 2.0% last month
  • Average workweek hours are expected remain unchanged at 34.9 hours

Some of the employment data seen over the last month shows:

  • Initial jobless claims were higher during the survey week compared to the comparable week last month. Claims surprisingly jumped to 412K during the survey week (was expecting a fall two 359K during the week). Continuing claims also were higher at 3.518 billion versus an expected fall 3.43 million. A caveat to the claims data is that there has been a lot of apprehension in believing the numbers. Axios did a report this month saying that because of various factors, the weekly numbers are creating some "noise". They cited that some states have started reducing the programs benefits and more plan to do so going forward and that has had an impact. They also commented that the labor department explicitly stated that the newest claims numbers "are not directly comparable to claims reported in prior weeks". Moreover, Maryland this month announced that it found 508,000 potentially fraudulent claims since May (that's a lot for just one state). Finally, they reiterated the fact that claims are just applications to receive employment benefits. They do not imply that all who submit an initial claim, are qualified for a claim. They cited that current data shows 36% receive payments. That compares to 40-45% from pre-pandemic trends. In other words, the reliability from the weekly numbers can be shaky at best.
  • ADP employment: The ADP estimate for jobs in June released on Wednesday showed a increase to 692K for June. That was higher than the expected 600K. The May number was revised lower to 886K from 978K. The caveat for this series is that ADP numbers have not been very accurate in forecasting the Labor Department's jobs numbers. The last two months have overshot to the upside, whereas previously, the estimates were tilted more to the downside. The bottom line is that like the initial claims, the estimates from ADPs model, may have it's own set of forecasting problems.
  • ISM manufacturing PMI fell to 60.6 from 61.2 last month. The employment component continued its move to the downside falling to 49.9 from 50.9 in May. That takes the subcomponent into contractionary territory for the first time in seven months. The ISM services data will not be released until Monday. As a result we get no help from that series this month.
  • Challenger: The Challenger jobs report this week showed that job cuts fell to 24,586 in May from 20,647 in June. This was the lowest since June 2000. Moreover challenger announced at 212,661 job cuts evident announced in the first half of the year which is the lowest since 1995. That is a good news of for the jobs report.

When discussing the economy and policy, the doves (including Chair Powell) cite the number of people still unemployed. That number is likely impacted by a number of things including the added unemployment benefits of $300 per week. Nearly 1/2 of the US states have voluntarily stopped those payments. If the theory is correct, the employment statistics should start to improve more dramatically. That should be supportive of the USDJPY and may continue to support the USD vs the EUR, CHF and GBP. However, it could also see the risk currencies falter if stocks start to tank (interest rates start to rise).

Being a technician, paying attention to the price action and key technical levels is always my suggestions.

A caveat on risk: Volatility from the employment report can be brutal. Add the fact that the US will be entering the Fourth of July holiday weekend. If risk is too high, traders always have the option to take the day off for when risk is more manageable. Alternatively, if you are to trade, let the dust settle before sticking your nose in. It might save you from the volatile, illiquid ups and downs that can dominate the first two minutes after the key report.