US NFP Preview:
- Consensus forecasts are looking for jobs growth of +325K while the unemployment rate (U3) is anticipated to drop to 3.5% from 3.6%, a new low post-pandemic.
- A softer than expected May US ADP employment change report and the May US ISM manufacturing index employment subcomponent in contraction territory suggest that the US labor market is weakening.
- Will the May US jobs report change the Federal Reserve’s rate hike path? 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.
Jobs Data Back in Focus
Chatter about a potential US recession is growing, but the US labor market has proved resilient – at least, thus far in 2022. According to a Bloomberg News survey, the US economy added +325K jobs in May from +428K jobs in April, with the US unemployment rate (U3) falling from 3.6% to 3.5%. The US participation rate is expected to edge higher to 62.3% from 62.2%, while US average hourly earnings are anticipated to come in at +5.2% y/y from 5.5% y/y.
While the likelihood of a 75-bps rate hike in June has all but disappeared, questions remain over just how long the Federal Reserve will march forward with 50-bps rate hikes, currently anticipated in June and July; will a pause be announced at Jackson Hole in August, or is another 50-bps rate hike viable in September? A sagging US Dollar, weighed down by the recent decline in Fed hike odds, stands to prove vulnerable to the May US jobs report – regardless of how the chips fall.
Atlanta Fed Jobs Growth Calculator (May 2022) (Chart 1)
The US economy continues to make steady progress towards ‘full employment’ as experienced pre-pandemic. According to the Atlanta Fed Jobs Growth Calculator, the US economy needs +331K 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/13:15 GMT. You can join live by watching the stream at the top of this note.
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--- Written by Christopher Vecchio, CFA, Senior Strategist
