- US Change in Nonfarm Payrolls (May) M/M Exp. 160K (Low 90K, High 215K, Prev. 160K, March. 208K)
- US Unemployment Rate (May) M/M Exp. 4.9% (Low 4.9%, High 5.1%), Prev. 5.0%, March. 5.0%
- US Average Hourly Earnings (May) M/M Exp. 0.2% (Low 0.1%, High 0.4%), Prev. 0.3%, March. 0.2%
European Estimates
BBVA: 199K
Lloyds: 195K
Deutsche Bank: 170K
BNP Paribas: 110K
US Estimates
Scotiabank: 185K
Golman Sachs: 165K
BofA: 160K
SocGen: 140K
Morgan Stanley: 140K
JPMorgan: 125K
The NFP report at 1330BST/0730CDT will be under intense scrutiny as it is the final jobs report before the June rate decision by the FOMC. The market has increased the probability of a hike at the June meeting significantly in recent weeks and a strong labour market has always been a key pillar on which Fed members say they would begin normalization. Of note, FFR futures currently price in a 20% chance of a hike in June.
Expectations are for a reading of 158K and although this is below the speculative benchmark of 200k, as we approach full employment the number of jobs the economy is able to create per month is diminished. One also has to consider that this reading will be reduced by 35,000 as a result of striking Verizon workers, who will be classified by the Bureau of Labor Statistics as unemployed for the month of May. All in all, many expect this to be a somewhat disconsolate reading, especially against a back drop of such strong labour gains, with the average reading for last year at 240k.
This is the final NFP report before the Fed meet on June 15th and expectations for a hike, although somewhat diminished the last week or so, peaked at 34% last Tuesday/Wednesday. This is the first meeting this year where there has been a material chance of a hike and given the reports proximity to the meeting, there is in many respects, a greater chance for volatility in markets surrounding the report, given the potential wider repercussions.
Market Reaction:
Given the somewhat downbeat expectations for the headline reading, anything well below the expected will cause the usual Algo/fast money moves. However, it would have to be a seriously weak reading in order to take June completely off the table, especially as the Fed have made such an effort in recent weeks of informing the market that June is most definitely a ‘live’ meeting. Ergo, the potential downside may not be enough to slow the USD index’s steady grind higher as we head towards June 15th. As ever a beat on the headline reading would cause an initial bout of USD strength and play into the overall backdrop, where USD bulls are still at the fore.