Falling US jobs mean fewer Fed hikes


The July employment reports for the US and Canada will be released later today and this is the highlight of the day. This is a clear case of “bad news is good news” as the market wants to see some slowdown in hiring so the FED and Bank of Canada (BOC) can slow rate hikes. In addition, salary data will also be watched very closely to see how quickly it increases. They do not follow inflation and should increase by 0.3% MoM.

Non-farm employment report

  • Consensus estimate payroll +250K
  • Private payroll +230K
  • June payrolls were +372K
  • Consensus estimate of the unemployment rate: 3.6% vs. 3.6% previously
  • Consensus participation rate 62.2% before
  • Previous underemployment Previous U6 6.7%
  • Year-on-year average hourly earnings +4.9% vs. +5.1% before
  • Average hourly earnings MoM exp +0.3% vs. +0.3% before
  • Average weekly hours exp 34.5 vs 34.5 before

Here’s the July jobs story so far:

  • ISM employment services 49.1 against 47.4 before
  • ISM manufacturing employment 49.6 vs. 47.3 before
  • Job cuts at Challenger rose 36.3% in July from 58.8% in June
  • Employment in Philadelphia 19.4 vs. 28.1 previously
  • Empire Jobs 18.0 vs 19.0 before
  • Initial survey of unemployment insurance claims week 261K vs 240K last month
  • The ADP report is not published at the moment because it has been redrafted

According to BMO:

Seasonally, payrolls have a slight tendency to outperform with 52% of previous readings exceeding forecast and 48% missing by 82,000 and 60,000, respectively. Meanwhile, the unemployment rate was at or above estimates 68% of the time and was worse than expected 32% of the time.

Goldman Sachs estimate:

  • We estimate non-farm payrolls increased by 225k in July (MoM sa), 25k below consensus and a slowdown from the +372k pace in June.
  • We estimate that the unemployment rate remained unchanged at 3.6% in July, in line with the consensus.

GS quotes:

  • July seasonal factors have become significantly more restrictive, even more than in June
  • and the seasonal adjustment algorithm may be overly tailored to the strength of employment related to reopening in the summers of 2020 and 2021

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