June Employment Report Expectations

With the ADP report set to be released on Thursday, July 6th, there will be consecutive days of jobs data hitting the markets. The Labor Department will release their monthly nonfarm payroll assessment in the morning on Friday, July 7th. Experts are a bit divided this month based on the large expected range or 140k – 200k new jobs.

Growth in the middle of that range, at 170k, would be a good reaction after May’s data disappointed with only 138k new jobs. As we have highlighted previously, average hourly earnings continue to be the weak spot in these reports. Hourly earnings provide an indication of the inflation climate and become ever more important as the FED continues its tightening policy. As inflation is a lagging measure, a clear jump in average hourly earnings may signal inflation is closer to the Fed’s 2% target than previously imagined.

CME’s FedWatch Tool only gives the July meeting a 3.1% chance of having a rate change however a strong jobs report may push that number slightly higher. Ultimately, this report will likely not be a decisive factor in July’s Fed meeting, but it will be an important one. The unemployment rate is expected to remain low around 4.3% which is further indication that the pool of skilled labor is shrinking and wage growth is not far behind.

As with any report, volatility in the markets will be heightened. It is important traders are prepared and have a plan to manage their risk.

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