Locked and Loaded for another edition of jobs Friday

Another big one for the US

It is that time again for the monthly US jobs report.  The first Friday of the calendar month tends to be the date (unless it isn't) for the release. That is today... more specifically at 8:30 AM ET.  

This week Fed's Clarida said that we will start to get a better handle of the employment trends over the next few months as the economy reopens, kids start to go back to schools and the extra $300/week of unemployment benefits get fazed out (with September 1 being the official end data although a number of US states have already stopped payments voluntarily). Those dynamics should start to send workers back to work. However, there is the Delta virus which may still keep workers out of the workforce. In addition people retiring and exiting the workforce (and other boomer demographic trends) may also be starting to exert its influence, leaving employers short (and jobs less than pre-pandemic levels). 

What is expected?

• Nonfarm payroll is expected to add 870K new job. The level of jobs is still 6.7M shy of the pre-pandemic levels.  Adding 870K would continue the whittle away of that gap, but additional incremental jobs could become harder and harder. 
• The unemployment rate is expected to fall to 5.7% from 5.9% last month. Last month, the unemployment rate was expected at 5.7%.  The pre-pandemic unemployment rate was at 3.5%
  
• The participation rate came in at 61.6% in the June report. That is much lower than the 63.2% pre-pandemic (from Feb 2020).  A lower participation rate has an impact of increasing the unemployment rate all things being equal
• Average hourly earnings are expected to show a 0.3% gain. Last month the earnings also rose by 0.3% which was as expected. The average hourly earnings YoY came in at 3.6% in June but is expected to rise to 3.9% this month.  
  
• The underemployment rate (U6) employment rate came in at 9.8% last month versus 10.2% the previous month. The pre-pandemic rate stood at 7.0%
  

What have the other employment measures shown going into the BLS report?

• The initial jobless claims during the week of the BLS survey week spite higher to 419K, but that was not much different vs the prior month survey week of 412K. The jobless claims did move down to a low of 360K between the last report and this months report. The 360K low was the lowest post-Covid level. Seasonals and the auto slow down/retooling could also be an impact that made the numbers worse than expectations. Also there was rumblings about the attempt to fraudulently gain unemployment payments and that a number of the applied for claims were rejected i.e., the number is therefore artificially high. 
• ADP showed a job add of 330K on Wednesday which was well short of the expectations of 695K.  ADP noted that the July data represented a marked slowdown vs Q2 values.  
• ISM services employment component rose to 53.8 from 49.3 in June
• ISM manufacturing employment component also rose to 52.9 versus 49.9 in June
  

The wild card is the ADP report. Will the nonfarm payroll follow that measure, or will it blaze its own trail and follow up the June strong surprise, with another solid report.  

Be aware. Be careful. The report is notorious for volatile market conditions.  There are a lot of pieces and therefore interpretations that could upset the apple cart in the market rates.  

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August 07, 2021 at 12:14AM
Greg Michalowski
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