The non-farm payrolls release is the only game in town for markets today, with little else to distract from it. US-Iran developments remain uncertain, awaiting the Strait of Hormuz arrangement between Iran and Oman. Meanwhile, the returning pressure on tech shares will also be under the microscope with investors hoping to get some directional conviction from the jobs data later.
After a much softer June figure, the non-farm payrolls estimate for July is expected at +80k.
It will be interesting to see if there are any potential effects from the World Cup to boost private payrolls. It wasn’t the case in the June report (pending today’s revision though) with leisure & hospitality or
food & drinking places showing weaker signs instead.
Besides that, some analysts are pointing to potential for a modest drag from government payrolls this month. This comes after an uptick in government hiring in May – linked to poll worker hiring for primary elections – with some retention seen during June.
And the final point to note just in case is perhaps a seasonal factor with it being the summer holidays. As such, there will be a negative impact to the education sector for one. In that lieu, MNI warns that July months rank second in terms of declines in non-farm payrolls with only the January post-holiday layoffs being larger.
Looking to the unemployment rate, it is estimated at 4.2% in July – the same as it was in June. That said, the June figure came about amid a further drop in the labour market participation rate – which hit a 63-month low.
In terms of analyst estimates, it’s a mixed bag on the headline estimate but there is just a minor dovish skew towards the jobless rate and earnings. So, there’s that to keep in mind. Here’s the list as provided by MNI Markets:
In terms of impact, it’s all about how the jobs report today will change the outlook for the Fed.
And in that regard, it is arguably a very tall order and the surprise threshold is extremely high for it to really change things up for the Fed. As things stand, inflation data and US-Iran developments are arguably more important.
Fed chair Warsh has said that the labour market is “solid” and “steady”. So, it will take a very big surprise (to the downside) to change that view and call into question the prospects of a September rate hike.
As things stand, traders are pricing in ~63% odds of a move in September by the Fed.
This article was written by Justin Low at investinglive.com.
