It’s a holiday week in the US, but it’s also jobs week. So, anyone who bothers to check in on markets while they’re on vacation will at least have some top-tier data to parse.
NFP is obviously the headliner, but the update on job openings is crucial too. The last JOLTS report, you’re reminded, showed vacancies rose back above 10 million, even as the quit rate fell.
As ever, the viability of the soft landing narrative hinges on whether job openings come down without a sharp increase in the unemployment rate. In that context, the last JOLTS reading and May’s jobs report made for an awkward couple: Vacancies were 358,000 higher on the last business day of April but the unemployment rate rose 0.3% in May. Write it off to pervasive macro ambiguity and the overall “weirdness” of the pandemic economy, I suppose. Consensus is looking for a ~130,000 decline in job openings from the JOLTS update.
Typically, when the unemployment rate is 0.4% off the lows it presages an acceleration. But this time could really be different. This labor market is something we haven’t seen before, and a 4% jobless rate would still count as exceedingly low. Besides, consensus expects a decline to 3.6%. As for the NFP headline, economists expect 225,000.
I’m not sure it’s accurate to call that a “slowdown.” It’d be the fewest new jobs since three months ago, if that counts.
Bloomberg, in a belabored effort to add some kind of context, noted that a 225,000 print would count as “one of the smallest advances since the end of 2020.” The headline print has consistently come in ahead of estimates.
Revisions will be eyed closely. That’s probably too dramatic. Let me try again: Revisions will be glanced at. May’s hefty 339,000 headline came with a 93,000 addition to the two prior months’ combined tally, all juxtaposed with a 310,000 decline on the household survey, the largest in 13 months.
The number of unemployed rose 440,000 in the last report, the most since April of 2020. Challenger job cuts are due this week as well. That’ll be fun: Presumably, the data will come with an update on how many jobs were lost to A.I.+ last month.
Initial jobless claims were elevated at the highest levels since October of 2021 in three of the last four weeks, but dropped sharply in the week to June 24. “The recent weekly claims figures have challenged the notion that the jobs market is cooling as one might’ve anticipated in light of the 500bps of tightening already executed this cycle,” BMO’s Ian Lyngen and Ben Jeffery remarked, of last week’s sharp claims drop. The labor differential in the Conference Board’s confidence survey for June widened back out, erasing the decline seen in the May vintage.
It’d take a veritable disaster on the NFP headline and/or an unimaginable increase in the jobless rate to take a July Fed hike off the table. This is a Fed which wants to hike at least one more time, and this is also a Fed which has demonstrated a propensity to take any hikes the market is willing to give them.
July is almost fully priced. Note that terminal rate pricing is up around 5.45% and markets have faded rate cut odds for 2023 almost entirely.
“Embedded within the strikingly high odds the Fed moves in late July are expectations for the employment and inflation reports in the interim to demonstrate the continued resilience of the real economy,” Lyngen and Jeffery added, noting that considering Jerome Powell’s consistent messaging across congressional testimony and at last week’s events in Europe, “foregoing the opportunity to hike in July is an unlikely outcome.”
Also on deck this week: Both ISM surveys, ADP, PMIs out of China and an RBA decision, which is notable in the context of central banks which’ve re-escalated in the face of persistent inflation, tight labor markets, an apparent trough in housing and generally sturdy economies.
