May Payrolls Preview: The Anti-Goldilocks Print

Summary

The US is expected to add 88k nonfarm payrolls in May, a modest slowdown from the 115k added in April. The unemployment rate is seen unchanged at 4.3%. Average hourly earnings are expected to rise 0.3% M/M, while the annual rate is seen easing to 3.4% from 3.6%. As Newsquawk notes, ADP's stronger-than-expected 122k private payrolls print has offered some encouragement, though analysts caution that ADP data tends to deviate from official BLS figures, and that prior pick-ups have proved false signals. Business surveys offer little comfort, with both the ISM manufacturing and services employment sub-indices remaining in contractionary territory. Traders will be watching closely for signs of labor market deterioration, given that FOMC officials view employment risks as tilted to the downside, though Fed officials are seemingly more concerned about the inflation side of its mandate, amid the labour market stability.