It’s expected that the unemployment rate rose slightly and non-farm payrolls had only a small increase
- All eyes turn to US jobs data amid signs of cooling in the labor market.
- The markets have priced in a lot more rate cuts than Fed officials expect.
- Soft numbers may revive growth concerns, pressuring stocks downward.
Financial markets took in stride signs of malaise in the US labor market. Wall Street is on pace to finish the day in the black, with the bellwether S&P 500 index probing its highs for the year. ADP Inc reported that its gauge of private payrolls showed a loss of 33,000 jobs in June. That marks the first negative reading since March 2023.
This data precedes official employment figures from the Bureau of Labor Statistics (BLS). It is expected to show that nonfarm payrolls rose by just 110,000 last month, amounting to the smallest increase since October 2024. The unemployment rate is seen rising to 4.3%, the highest since October 2021.
The US labor market seems to be weakening
A given month’s ADP jobs tally is not a consistently accurate predictor of what the BLS figures will say for the same period. Nevertheless, analytics from Citigroup warn that US economic news-flow has weakened relative to consensus forecasts in recent weeks, signaling that analysts’ models are too rosy and hinting at disappointments ahead.
Evidence pointing to a weakening jobs market has been piling up. The upward trend in initial jobless claims is steepening, with the four-week average up at levels unseen in two years. Continuing claims have risen to the highest since November 2021, signaling those claiming benefits are having a hard time finding new work.
A monthly report on US job cuts from Challenger, Gray & Christmas put layoffs in June at 48,000, the lowest so far this year. However, this marks a return to trend after dramatic cutbacks in the first quarter. So far this year, US companies have announced 744,308 in jobs cuts, the most since 2020.
Stocks may be in trouble if jobs data disappoints
A survey of US manufacturing from the Institute of Supply Management (ISM) showed job losses accelerated to the quickest pace in three months in June. Meanwhile, monthly adjustments of prior BLS reports have skewed sharply toward downward revisions. April’s data cut the prior two months’ estimates by a hefty 58,000 jobs.
If all of this boils down to soggy results on the incoming report, that would endorse the bond markets’ dovish departure from Federal Reserve interest rate cut forecasts. That might weigh heavily on stocks as economic growth concerns return. The US dollar may find a bit of support alongside Treasury bonds if “risk off” conditions return in earnest.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts #Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
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