Ahead of tomorrow’s main test with Nonfarm Payrolls, the US labor market today demonstrated its resilience with the private sector jobs reading well above analysts’ expectations. According to the monthly report by Automatic Data Processing (Adp), in June they were created 497.000 jobs compared to May. The forecasts of economists were for the creation of 220.000 jobs.
Markets in the red after the data
However, the news is not necessarily good news for the markets, judging by the reaction of Wall Street, which opens the session in the red with the S&P 500 at 4,400 points (-1%), also the Dow Jones marks a decline in1,05% a 33,916 points. The technology index, the Nasdaq Composite marks a decline dell’1% a 13,655 points. The price drops T-Note to 10 years and the yield rises, exceeding the 4%, following the ADP report on US private sector employment. The fear of analysts is that the strength of the labor market will push the Fed to continue its restrictive policy on interest rates for a long time to curb inflation.
US jobs, private sector beats expectations
In June they were created 497.000 jobs compared to the previous month, the largest increase since July 2022. This is well above the expectations of analysts who expected 220.000 new jobs.
While wages have grown by 6,4% on a year-over-year basis, but still down since 6.5% of the month of May. In particular the sector ofhospitality and entertainment he added 232.000 jobs, the sector of buildings 97,000, that of trade, transport and utilities 90,000. They have instead perso 42.000 jobs the manufacturing, 30.000 the sector INFORMATIONo, 16.000 the sector of financial activities. Overall, the amenities have added up 373,000 seatsthe producers of goods 124.000.
The minutes of the last June meeting of the Federal Reserve showed that the Central Bank intends to raise interest rates againbut at a slower pace. The possibility of an increase of 25 basis points in three weeks, now, is expected by the experts al 96%against l’82% from a week ago.
Also growing claims for unemployment benefits +12,000 in June a 248,000 unitsabove consensus estimates of 245.000.
Fed minutes, a 25bps hike in July very likely
According to the Fed minutes, published late yesterday evening, the FOMC’s intention is to continue raising interest rates to counter inflation. Despite the June break, voted unanimously, from the “dot plot”, i.e. from the forecasts of the various members of the board, we learn that the Central Bank does not intend to end with interest rate hikes, even if it will continue at a pace slower. The majority of FOMC members believe that they are appropriate at least two rate hikes by the end of 2023.
According to the Federal Reserve Committee, “leaving interest rates unchanged at the June meeting would have given them more time to assess the economy’s progress towards the Maximum Employment and Price Stability Committee’s targets“. FOMC members said a short break would provide time to assess the impacts of rate hikes, currently 5-5,25%.
“The minutes of the last Fed meeting released yesterday, surprisingly, hshowed a division among members that had not emerged since the last release where there had been unanimity in the pause. Actually, aSome exponents would have preferred an increase, even if in the end they aligned with the consensus. A raise from 25bp in July seems very likely barring surprises from the upcoming macro data, also in light of what was confirmed yesterday by the President of the New York Fed, Williams (“the data published so far support the hypothesis that the Fed still has work to do on monetary policy”. in the report of Monte dei Paschi.
NFP, the expectations
US labor data, especially the nonfarm payroll report (NFP), are in the spotlight in the first week of 2 semester 2023. Tomorrow, together with the NFP, we will also see the unemployment rate, currently at 3.7%. Over the past 12 reports, the nonfarm payroll numbers have surpassed waited 11 times.
Nonfarm Payrolls chart Fonte: Tradingeconomics.com
According to consensus estimates, new NFP jobs excluding agriculture created in June are expected to be 255.ooo units, therefore in sharp decline compared to 339,000 units of the previous month. We recall that the data relating to the month of May was much higher than the expectations of approximately 190,000 new jobs.