- US Change in Nonfarm Payrolls (Jul) M/M Exp. 225K (Low 140K, High 310K), Prev. 223K, May. 280K
- US Unemployment Rate (Jul) M/M Exp. 5.3% (Low 5.2%, High 5.4%), Prev. 5.3%, Apr. 5.5%
- US Average Hourly Earnings (Jul) M/M Exp. 0.2% (Low 0.1%, High 0.3%), Prev. 0.0%, Apr. 0.3%
July’s nonfarm payrolls will be in strong focus following the FOMC rate decision last week with comments that an increase in interest rates will occur following “some further” improvement in the labour market. The consensus is looking for a small increase on the previous figure at 225K with unemployment forecast to remain unchanged. Unemployment previously fell which was attributed to employees leaving the workforce. Furthermore, both the monthly and yearly average hourly earnings figures are expected to rise on their previous release.
Analysts are highlighting the components of the report as crucial, which include the pace of jobs gains and income increases. Furthermore, the majority of analysts state that a figure below expectations could result in September no longer being considered for rate lift-off. Also noting that US challenger job cuts came in at 105.696K vs. prev. 44.842K, with the majority of those cuts coming from the military sector.
In terms of the recent labour data, continuing claims have risen off of their multi-year lows which could create concern for the Fed yet the employment component of ISM non-manufacturing printed 59.6 against June’s 52.7. However, Wednesday’s ADP release failed to meet expectations at 185K vs. Exp. 215K alongside revisions for July falling by 8K to 229K which could cause additional concern for the state of the labour market.
Market Reaction
A strong NFP reading alongside increase in average hourly earnings could see the US yield curve steepen as investors affirm September as viable month for rate lift-off or generally bring forward rate hike expectations. The USD-index is likely to rise higher on the back of a good figure helping to maintain the upward trend. However, a miss on expectations is likely to cause investors to push back rate hike expectations after the mixed data out of the US, with December looking like a more likely date. Of note, futures markets are currently pricing in a 46% chance of a rate-hike in September.