Market Insight – NFP PREVIEW

Traders are on high alert for the release of the Nonfarm payrolls job report later today, with expectations high that the USA economy created 225,000 jobs in the month of June.

The US economy unexpectedly added 339,000 jobs in May 2023, the most in four months, and way above market forecasts of 190,000. Figures for March and April were revised up, bringing employment 93,000 higher than previously reported.

Figures continue to point to a tight labour market, with employment rising by an average of 314,000 per month so far this year. Leisure and hospitality are still trending up, with the sector adding an average of 77,000 jobs per month over the prior 12 months.

Yesterday, the ADP jobs report showed that the US unexpectedly created 497,000 jobs in June 2023, the most since February 2022, and well above forecasts of 228,000.

Investment bank Goldman Sachs noted that “We suspect a distortion in the ADP seasonal factors contributed to the strength, as ADP employment growth had picked up in June in 6 of the last 7 years”.

In terms of how that effects today’s figures Goldman Sachs state they are unchanged and says, “We left our nonfarm payroll forecast unchanged at an above-consensus +250,000.”

Another major investment bank, JP Morgan, though, are weary. JP Morgan says that “ADP has generally not tracked BLS private nonfarm payrolls that well over time.”

Moreover, they add that “but yesterday’s report does hint at some potential upside risk to our call for a 165,000 gain in private payrolls (200,000 headline).”

Going into the report, July data fits with an improving jobs market. Initial job claims of 248,000 remained well below historical averages and the brief peaks from the first three weeks of June, echoing evidence of a tight labour market from other surveys for the period.