US non-farm payrolls preview

This month’s jobs report is expected to show continued growth in US employment, but even here trade war fears may make themselves felt.

It will be a busy week for US data, although activity will be focused on the first and last two days of the week thanks to the Independence Day holiday on Wednesday.

The US economy is expected to have added 195,000 jobs for June, down from 223,000 in May. This figure would be consistent with jobs growth (around 200,000 per month) that has remained the norm since mid-2010. It is striking how particularly weak readings are rapidly countered by a rebound, indicating the strength of the US economy.

As is usual these days, the wage figure possesses equal importance to the headline jobs number itself. Average hourly earnings rose 0.3% in May, and economist predictions suggest that a print of either 0.2% or 0.3% for the month-on-month figure is expected. Even the latter is not wildly impressive, but it would raise the year-on-year figure to 2.8% for June, matching the highs from earlier in the year.

Much ink will doubtless be spilt over this month’s report, with plenty of agonising over the US economy if the headline number misses estimates. It is worth remembering that even a miss of 80,000 on a non-farm payrolls (NFP) report would be equal to only 0.05% of the US workforce. The real truth is that the US employment picture is solid, and has been for years. The lack of real wage growth is perhaps the bigger concern, although even here there are signs that it is moving steadily higher, with the employment cost index reaching the highest level in ten years.

A stronger employment print, or a higher wage growth figure, would likely be dollar positive, but also help firm up risk appetite more generally. With trade war concerns at the forefront of investors’ minds, weakness in this month’s NFP report could well be assigned to US companies cutting back on hiring on fears that growth will suffer. However, as history shows, months of weakness are usually followed by a return to the mean. 

Non-farm payrolls

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