Expectations are that the unemployment rate will decline from 6.7% to 6.6%, while the median consensus payrolls estimate lies at 215,000. This is its highest median estimate so far in 2014, and tends to give credence to the feeling that the US economy is improving as well as lending support to the recent decision by the Federal Reserve to reduce its stimulus.
The tiny snag is that first-quarter growth amounted to a mere 0.1% rise against expectations, for an increase of 1.2%. Net exports and investment was a big drag on the gross domestic product. The Chicago purchasing managers index number helped to negate the weak historical number, by rising at its fastest pace in six months. Rising demand for durable goods has helped to drive gains in manufacturing.
Buoyed with optimism, the Federal Open Market Committee went ahead with its linear tapering, reducing asset purchases by an additional $10bn per month, clearly feeling that the winter weather should be given all of the blame for this weak GDP number, and that Q2 will no doubt be better.
It’s therefore quite important that this month’s payroll number is a good one. Markets participants will want to see the expectation at least met, given that it will be touted as a sign that Q1 was an outlier in the overall US growth story.