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Key Events This Week: Here Come Payrolls

Courtesy of ZeroHedge View original post here.

The first half of this week will be quiet before the tempo picks up substantially with Thursday's ISM print and Friday's Non-Farm Payrolls which consensus expects to print at 675k on Friday up from previous 559k, if well below where the number has to be for the labor market to normalize by end 2021. Then, one week from Tuesday, Q2 earnings season begins.

In terms of what to expect from payrolls, Deutsche Bank economists are forecasting a +700k increase in nonfarm payrolls following May’s +559k reading, which in turn should send the unemployment rate to a post-pandemic low of 5.7%. That said, even with a +700k increase, the total number of nonfarm payrolls would still be – 6.9m beneath its level in February 2020. Ahead of payrolls, the jobs plentiful / jobs hard-to-get series within tomorrow's June consumer confidence release will be interesting as it has been been highly correlated with the unemployment rate. Wednesday's ADP employment survey (+550k consensus vs. +978k) will also be watched even if has been well above payrolls of late.

The jobs data has been the one clear soft spot in US economic data points that has given Powell reason to hold the line despite a number of hawkish FOMC speeches last week and elevated inflation figures. Although one report wont severely alter the Chair's t,ming, we see a good number  as further confirmation that we remain on track for policy hints to be dropped at the Jackson Hole meeting come late August.

We also get the US ISM report (Thurs) and consumer confidence (Tues). Both should hold at firm levels with the former again highlighting the supply chain strains that are putting up costs and boosting the chances that inflation stays higher for (much) longer (as long as 4 years according to BofA).

June ISM is expected to come in at 61.0, little changed from the May reading of 61.2 and continuing to signal broad-based growth in activity. Demand for manufactured goods remains elevated with the new orders index climbing to 67.0 from 64.3 in May. New orders are expected to remain strong in June. This along with the strong reading in May should support some growth in the production index, which has fallen by 9.6 points over the past two months reflecting the effects of the supply chain shortages. Meanwhile, the supplier deliveries index, which increases when delivery times are slower, should remain elevated and could very well increase given the recent shutdowns in ports in China. This could lead to inventories falling below the breakeven level (50.0) again. Demand for goods remains strong which should support hiring activity. Moreover, the industry generally offers higher paying jobs that should not be as susceptible to disincentives from the generous unemployment insurance benefits. That said, lack of goods inputs may limit employment gains. Meanwhile, the prices index will remain at historically elevated levels reflecting the ongoing demand supply imbalance, rising oil prices, and high shipping costs.

Conference Board confidence is expected to decrease moderately to 116.0 from 117.2 previously. In May, the Present Situation Index, which measures consumers’ assessment of current business and labor market conditions, rose to 144.3 from 131.9. However, the Expectations Index, which captures consumers’ short term views for income, business, and labor market conditions, decreased to 99.1 from 107.9.  Although stronger economic growth is expected this year, consumers still remain concerned about COVID and higher inflation.

Elsewhere, OPEC+ holds their latest monthly meeting on Thursday. Sources suggested the group is mulling a further easing of curbs, although the specifics have not yet been ironed out, reports suggested a curb-easing of 500kBPD. Look out for more sources in coming days.

We also get the June auto sales number on July 2, which is expected to come in flat compared with the prior month at 17mn SAAR. Auto demand is running way ahead of traditional economic indicators such as the unemployment rate and consumer confidence, but supply side constraints will limit the sales upside in the near term.

Here is Goldman with a focus on key US events: The key economic data releases this week are the ISM manufacturing index on Thursday and employment report on Friday. There are several speaking engagements from Fed officials this week, including from President Williams on Monday.

Monday, June 28

  • 09:00 AM New York Fed President Williams (FOMC voter) speaks: New York Fed President John Williams will participate in a virtual panel discussion hosted by the Bank for International Settlements. Prepared text and moderated Q&A are expected.
  • 10:30 AM Dallas Fed manufacturing index, June (consensus 32.5, last 34.9)
  • 12:00 PM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will discuss inflation risk at an event hosted by the Rotary Club of Atlanta.
  • 01:10 PM Fed Vice Chair for Supervision Quarles (FOMC voter) speaks: Fed Vice Chair for Supervision Randal Quarles will discuss central bank digital currencies at an event hosted by the Utah Bankers Association. Prepared text and moderated Q&A are expected.

Tuesday, June 29

  • 09:00 AM FHFA house price index, April (consensus +1.6%, last +1.4%)
  • 09:00 AM S&P/Case-Shiller 20-city home price index, April (GS +1.8%, consensus +1.80%, last +1.60%): We estimate the S&P/Case-Shiller 20-city home price index rose by 1.8% in April, following a 1.60% increase in March.
  • 09:00 AM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will participate in a virtual event hosted by MNI.
  • 10:00 AM Conference Board consumer confidence, June (GS 117.0 consensus 119.0, last 117.2): We estimate that the Conference Board consumer confidence index edged down by 0.2pt to 117.0 in June. Our forecast reflects weaker signals from other consumer confidence measures.

Wednesday, June 30

  • 08:00 AM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will discuss regionalism at an event hosted by the Buckhead Coalition. Audience Q&A is expected.
  • 08:15 AM ADP employment report, June (GS +600k, consensus +550k, last +978k): We expect a 600k rise in ADP payroll employment for the month of June, following a 978k rise in May. The decline in initial jobless claims should provide a technical boost to the ADP model.
  • 09:45 AM Chicago PMI, June (GS 71.0, consensus 70.0, last 75.2): We estimate that the Chicago PMI pulled back by 4.2pt to 71.0 in June, reflecting mean reversion in several subcomponents that saw outsized jumps in the prior month but continued upward support from slow supplier deliveries.
  • 10:00 AM Pending home sales, May (GS flat, consensus -1.0%, last -4.4%): We estimate that pending home sales were flat in May, reflecting mixed regional home sales data.
  • 01:00 PM Richmond Fed President Barkin (FOMC voter) speaks: Richmond Fed President Thomas Barkin will participate in an event hosted by the Northern Virginia Hispanic American Chamber of Commerce.

Thursday, July 1

  • 08:30 AM Initial jobless claims, week ended June 26 (GS 385k, consensus 389k, last 411k); Continuing jobless claims, week ended June 19 (consensus 3,328k, last 3,390k); We estimate initial jobless claims decreased to 385k in the week ended June 26.
  • 09:45 AM Markit manufacturing PMI, June final (consensus 62.6, last 62.6)
  • 10:00 AM ISM manufacturing index, June (GS 60.0, consensus 61.0, last 61.2): We estimate that the ISM manufacturing index declined 1.2pt to 60.0 in June, reflecting moderation from elevated levels in some components. Our manufacturing tracker edged up 0.1pt to 58.5.
  • 10:00 AM Construction spending, May (GS +0.3%, consensus +0.4%, last +0.2%): We estimate a 0.3% increase in construction spending in May.
  • 02:00 PM Atlanta Fed President Bostic (FOMC voter) speaks: Atlanta Fed President Raphael Bostic will participate in a panel discussion hosted by Habitat for Humanity. Audience Q&A is expected.
  • 05:00 PM Lightweight motor vehicle sales, June (GS 16.0m, consensus 17.0m, last 17.0m)

Friday, July 2

  • 08:30 AM Nonfarm payroll employment, June (GS +750k, consensus +700k, last +559k); Private payroll employment, June (GS +675k, consensus +600k, last +492k); Average hourly earnings (mom), June (GS +0.4%, consensus +0.3%, last +0.5%); Average hourly earnings (yoy), June (GS +3.8%, consensus +3.6%, last +2.0%); Unemployment rate, June (GS 5.6%, consensus 5.7%, last 5.8%): We estimate nonfarm payrolls rose 750k in June (mom sa). Our forecast reflects a sequential easing of labor supply constraints due to the arrival of the youth summer labor force (+1.8mn in a typical June) and the wind-down of federal unemployment top-ups in some states. Coupled with very strong labor demand and continued progress on vaccinations and reopening, we believe job growth probably picked up further in the month. And while big data measures were mixed, continuing jobless claims declined significantly in states that are ending UI top-ups early (-200k relative to the trend in all other states). More generally, fewer education-sector workers reduces scope for end-of-school-year layoffs.
  • We estimate a two-tenths drop in the unemployment rate to 5.6%, reflecting a strong household employment gain but a further rise in the participation rate. We estimate a 0.4% rise in average hourly earnings (mom sa), reflecting continued labor shortages partially offset by negative calendar effects. Coupled with last spring’s waning composition effects, this would result in a further rise in the year-on-year rate (from +2.0% to +3.8%).
  • 08:30 AM Trade Balance, May (GS -$72.0bn, consensus -$71.3bn, last -$68.9bn): We estimate that the trade deficit increased by $3.1bn to $72.0bn in May, reflecting an increase in imports and decrease in exports in the advance goods report.
  • 10:00 AM Factory orders, May (GS +1.6%, consensus +1.5%, last -0.6%); Durable goods orders, May final (last +2.3%); Durable goods orders ex-transportation, May final (last +0.3%); Core capital goods orders, May final (last -0.1%); Core capital goods shipments, May final (last +0.9%): We estimate that factory orders increased by 1.6% in May following a 0.6% decline in April. Durable goods orders increased by 2.3% in the May advance report, but core capital goods orders declined by 0.1%.

Source: BofA, Goldman


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