US NFP: Guesses for July gravitating around the yearly average of 172k - BBH
Research Team at BBH, suggests that the nearly flat US jobs growth in May continues to bedevil participants even though the June series snapped back from the weakest in six years to the strongest in eight months.
Key Quotes
“Most guesses for July appears to be gravitating around the average so far this year, which is 172k. Many look for the unemployment rate to ease back to 4.8% from 4.9%. A 0.2% increase in average hourly earnings is needed to keep the year-over-year pace at 2.6%.
Many economists, including those at the Federal Reserve, recognize that as full-employment is reached, the monthly jobs growth will slow. Indeed, this appears to be slowly happening. Consider that in 2014, monthly non-farm payrolls averaged 251k. Last year's average was 229k. Investors and policymakers are trying to decipher this year's trend, which is made more difficult by the recent volatility.
There seems to be an asymmetrical risk associated with today's employment report. Strong jobs growth is unlikely to materially boost the market perception of the odds of a September hike. There is, after all, another jobs report the FOMC will see prior to its decision late next month. A disappointing report would more likely impact market expectations. This is to say that the dollar is more likely to fall on a weaker report than sustain gains on a strong one.
The US and Canada report June trade figures as well today. The US reports an advanced estimate of merchandise trade, and it has removed some volatility from the final report. A slightly wider deficit is expected (~$43 bln from ~$41 bln). When adjusted for inflation, it could impact expectations for revisions to Q2 GDP, which currently seem biased to the downside. Canada will likely report a smaller merchandise trade deficit. The May shortfall was a record C$3.3 bln. Recall that non-oil exports fell. Most look for small improvement to a C$2.8 bln deficit, which would still be large for Canada.”