US NFP Preview:
- Consensus forecasts are looking for payrolls to come in at +650K, an improvement over last month’s disappointing +266K reading.
- Taper talk has started to increase in recent weeks, and a strong May US jobs report could add fuel to that fire.
- Will a rebound in the US jobs report help the US Dollar breakaway from its yearly lows?We’ll discuss these questions and more in context of the April US nonfarm payrolls report starting at 8:15 EDT/12:15 GMT. You can join live by watching the stream at the top of this note.
Focus Returns to US Labor Market
The main issue for the US Dollar when it comes to the May US Nonfarm Payrolls report is whether or not the US labor market regained its momentum after a disappointing April report. After all, the prior month’s reading came in at +266K against an expectation for a round +1000K (or +1M) jobs added.
Market participants are indeed expecting that May reading will show a strong rebound, given that jobless claims continue to trend lower and vaccination rates have improved, leading to many lockdowns and/or restrictions otherwise to be lifted. Consensus forecasts are looking for a reading of +650K, which should help the unemployment rate (U3) drop further lower from its still-lofty 6.1% level. Meanwhile, the US labor force participation rate is still a meager 61.7%.
The May ADP employment change report, coming in at +978K, will likely bias expectations higher heading into the official release today.
Atlanta Fed Jobs Growth Calculator (June 2021) (Chart 1)
Even if there are good jobs data, there is still a long ways to go before the US reaches ‘full employment’ as experienced pre-pandemic. According to the Atlanta Fed Jobs Growth Calculator, the US economy needs +761K jobs growth per month over the next 12-months in order to return to the pre-pandemic US labor market of a 3.5% unemployment rate (U3) with a 63.4% labor force participation rate.
We’ll discuss these questions and more in context of the May US nonfarm payrolls report starting at 8:15 EDT/12:15 GMT. You can join live by watching the stream at the top of this note.
--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
