What to expect in the next Nonfarm Payrolls report?

Amidst mounting recession fears and hawkish Fed expectations, markets eagerly look forward to Friday’s critical United States (US) jobs data for June to provide a fresh directional impetus to the US Dollar.

The US economy is widely expected to have added 225K jobs in the sixth month of the year, compared with a 339K jobs growth reported in May. The Unemployment Rate is expected to tick down to 3.6% in June vs. 3.7% reported in May.

Apart from the headline Nonfarm Payrolls number, the Average Hourly Earnings will be closely scrutinized for fresh hints on the country’s wage inflation, which has a strong bearing on the Fed rate hike prospects. The Average Hourly Earnings are seen rising 4.2% on a yearly basis in June as against a 4.3% increase booked previously.

The US labor market remains very tight, as aptly portrayed by the latest data published by Automatic Data Processing (ADP) on Thursday. The United States private sector employment rose by 497,000 in June, followed by the 267,000 increase recorded in May while outpacing estimates of 228,000 by a wide margin. Meanwhile, JOLTS Jobs Openings came in at 9.82 million at the end of May, dropping from an upwardly revised 10.3 million in April, just missing the expectations of 9.935 million.

Analysts at TD Securities noted, “we look for payrolls to stay strong in June, though they would still be losing momentum at the margin following more robust increases in April-May. We also expect the UE rate to drop a tenth to 3.6% as we are assuming job creation in the household survey will normalize after the May plunge. Average hourly earnings likely advanced 0.3% m/m, with the y/y measure staying unchanged at a still-elevated 4.3%.”