Goldman sees US jobs undershoot

On tonight’s all important US non-farm payrolls, GS says nup:

• expect a fairly lackluster employment report for June, with nonfarm payroll growth of 150,000, similar to the average of the past three months, and a drop in the unemployment rate to 7.5%, a reversal of last month’s uptick. On the positive side, the ISM nonmanufacturing employment index as well as online help-wanted advertising rebounded in June, and the ADP report was a bit better than expected. On the negative side, the sequester is likely to weigh on job growth more than earlier in the year, manufacturing employment looks weak, and jobless claims rose slightly in June.
• More broadly, our view remains that the US labor market is still quite far from “substantial improvement.” Job growth is only moderately better than it was last fall, when the FOMC restarted its asset purchase program. More importantly, the level of employment remains an estimated 4% below potential as much of the drop in the unemployment rate from the 2009 peak reflects a cyclical drop in labor force participation.

In our opposite world a weak print would presumably cause a rally.