Ahead of today's latest "good news is great news, bad news is better" NFP release, here is what Wall Street banks expect will be reported in just over half an hour's time:
- HSBC 175K
- Goldman Sachs 175K
- Citigroup 185K
- JP Morgan 200K
- Deutsche Bank 200K
- Bank of America 225K
- Barclays 225K
- UBS 230K
- US Change in Nonfarm Payrolls (May) M/M Exp. 215K (Low 110K, High 350K), Prev. 288K, March 203K
- US Unemployment Rate (May) M/M Exp. 6.4% (Low 6.1%, High 6.6%), Prev. 6.3%, March 6.7%
- The nonfarm payrolls release is expected to show another reading above the 200K mark following the 288k rebound from winter conditions shown in April
- Today’s number is not expected to alter the future course of Fed monetary policy
And some more thoughts from RanSquawk
The unemployment rate is expected to rise to 6.4% having seen a significant drop last month from 6.7% to 6.3%. This was largely attributed to a decline in the labour force participation rate (62.8% from 63.2%), which the BLS said was due to less people than usual re-entering the labour force rather than an increase in those exiting. Many analysts note that May was a particularly strong month for the US services sector, highlighted by the preliminary US PMI reading last week coming in at a twenty-six month high (58.4, Prev. 55.0). Wednesday’s ISM non-manufacturing employment component also rose to 52.4 from 51.3 in April. However, data from the manufacturing sector in May has not been as strong; after being revised twice on Monday, the employment component of the ISM manufacturing report was shown to be 52.8, down from 54.7 in April.
The four-week average for initial jobless claims is at its lowest level since August 2007, however, claims during the survey week were slightly higher in May than in April, as noted by analysts at Credit Agricole. Wednesday’s ADP report, that has methodological similarities to NFP, was at its lowest since January at 179K against an expectation of 210K. As an interesting side note, yesterday’s Challenger job cuts release showed 16K job cuts in May attributed to lay-offs recently announced by Hewlett-Packard; depending on those workers’ destinations, they could have an effect on the NFP reading.
An NFP headline figure towards the top end the expected range is likely to cause a knee-jerk reaction higher in riskier assets such as equities, although revisions to the prior have the potential to limit upside, and it is worth bearing in mind that the DJIA and S&P 500 hit yet another fresh all-time high yesterday (1,942) so scope for more upside may be somewhat limited. A similar reaction may be seen in the USD, which rallied to a four-month high (USD-index 81.02) as the ECB announced its latest easing package, although it still has upside potential after retracing the move and breaking back below its 200DMA.
Treasuries having risen from the 11-month low of 2.40% printed at the end of May, and with the Fed now focusing increasingly on inflation, the sustainability of any knee-jerk reaction in rates markets is likely to depend on whether there is evidence of wage pressure, as noted by Credit Suisse. Last month the hourly earnings component of the NFP report showed a minor slowdown in wage growth, rising by 1.9% Y/Y (prev. 2.1%).