The US labor market should be bracing for extreme scrutiny once the June payrolls report rolls around. Already, economists are forecasting an add of 110,000 jobs, well off the May add of 135,000 jobs. The expected range for June’s employment numbers goes from a high of 140,000 to a low of 75,000. At the same time, the unofficial ‘whisper’ number is pointing to a much lower increase—about 100,000 jobs.
Now that the economy is finally beginning to show signs of cooling, the Federal Reserve is still on the run. Even with expected slower precautions in job growth, officials don’t seem prepared to ease monetary policy anytime soon. These job openings reported in May will help fill in the picture of the employment landscape this week. Further valuable insights will come from the ADP June employment change and weekly jobless filings.
Expectations about unemployment is not far behind. Analysts are expecting a small increase to 4.3%, up from 4.2% in May. Wage growth looks set to continue at a strong pace, ensuring a continued 3.9% yr annualized growth rate. Though in actuality, it could fall a bit from 0.4% to 0.3% m/m. To the Federal Reserve’s long-term outlook, unemployment rates would stabilize at around 4.5% by the end of 2025.
If June’s employment numbers come in worse than expected, the financial markets will probably overreact. They might be beginning to price in additional easing by the Federal Reserve. Such actions would reflect ongoing concerns about economic resilience and the labor market’s direction.
Aside from payrolls, this week we will be getting some useful leading indicators. These will give us a better idea of what today’s economy looks like. On Tuesday we expect the release of June ISM manufacturing (10 a.m. 6/5) and services (10 a.m. 6/7) PMIs. On Monday, we’ll get a read on China’s manufacturing and services sectors.
That’s because the latest Personal Income and Outlays report for May came in with significantly lower incomes. Meanwhile, gently increasing prices signaled an uncertain economic picture. Inflation measures including the Consumer Price Index (CPI) and Producer Price Index (PPI) ticked up in May. This unexpected jump has certainly complicated the broader economic story.
Last week, the US dollar sunk to multi-year lows after closing down 1.5%. It’s on track for month-to-date losses of 2.2%. At the helm of the Federal Reserve, Chairman Jerome Powell is on a ‘wait-and-see’ course. He calls for greater transparency around the economic picture and the effects of former President Trump’s policies.
This week, market participants will be focused on the developing economic picture. They’ll be figuring out what on earth all these developments mean for the course of monetary policy going forward. Job growth, unemployment levels, wage growth, and inflation factor into the equation. Combined, they’ll provide essential clues about the overall US economy’s health and where it’s headed over the next several months.