Tonight’s US unemployment print for June (aka the non-farm payrolls or NFP) will set the tone for the rest of the calendar month in terms of risk taking and give more guidance to what the Federal Reserve will do at its next interest rate meeting. Futures are indicating at least a 70bps or 0.7% rise as the number of hawkish Fed members continues to outweigh any laggard doves.
But tonight’s print might not be the nail in the coffin to get interest rates higher, faster as there are some signs it could surprise to the downside.
The report is coming on the heels of a mixed bag of recent employment data: The latest Job Openings and Labor Turnover Survey, released on Wednesday, showed there were 11.3 million job openings in May, or 1.9 positions for every job seeker, and historically low levels of layoffs.
While that’s good news for job seekers, there are also signs that employers are starting to cut back. New job cuts data released Thursday by Challenger, Gray & Christmas revealed that US employers announced 32,517 layoffs in June, a 58.8% increase from the same month last year, and the highest monthly total since February 2021. Total job cuts through the first six months of the year, however, are down 37% from the first half of last year and are at their lowest levels since record taking began in 1993.
Separately on Thursday, the BLS reported that initial jobless claims for the week ending July 2 totaled 235,000, an increase of 4,000 from the prior week’s reading and the highest level since mid-January.
Looking at that initial jobless claims print from last night (my emphasis added):
The number of Americans filing new claims for unemployment benefits rose by 4K to 235K in the week that ended July 2nd, compared to market expectations of 230K, suggesting labor market conditions could be moderating. With the increase, jobless claims increased to their highest since January of this year. On a non-seasonally adjusted basis, initial claims rose by 11,919 from the previous week to 219,507, with notable increases taking place in New York (+5,340), Michigan (+4,770), and California (+3,934). The four-week moving average was 232,500, an increase of 750 from the previous week’s average.
Goldman Sachs is putting in a much lower estimate for tonight’s print (250K vs 268K expected) due to higher than expected layoffs:
That would take US jobs growth well below its lowest since April last year, burgeoning calls for a recession ahead in the second half of 2022: