The World Cup may provide an additional boost to U.S. June employment data, with Goldman Sachs estimating that the event could add approximately 40,000 jobs to the non-farm payrolls for the month, making the employment report released on Thursday stronger than market expectations.
According to a CNBC report on Thursday, economists surveyed by Dow Jones forecast a gain of 115,000 non-farm payroll jobs for June, lower than May's increase of 172,000. Goldman Sachs holds a more optimistic view, predicting a total non-farm payroll increase of 140,000.
Goldman Sachs' assessment is based on private data from small business payroll services provider Homebase. The data shows that while the overall hiring pace slowed in June, employment performance in World Cup host cities was relatively more stable, with notably stronger hiring in hospitality and leisure-related sectors.
For the market, the key point is not whether the World Cup alters the employment trend, but rather its potential to inflate the headline reading of the June data. Investors will be watching to see if the short-term job additions from the event mask the true extent of cooling in the labor market.
Event Boosts Demand in Specific Cities and Sectors
Goldman Sachs believes the employment impact of the World Cup should be concentrated primarily in the leisure and hospitality, professional and business services, and trade and transportation sectors. These industries are more directly linked to event-related consumption, visitor traffic, and service demand.
Homebase data supports Goldman Sachs' judgment. The report indicates that overall hiring continued to slow in June, but the year-on-year decline in employment across the 11 World Cup host cities was 1.2%, compared to a 3.5% decline in other cities.
This divergence suggests that labor demand in the event host cities may have received a boost. Concurrently, Homebase data shows a 9.5% increase in hiring within the hospitality sector, which Goldman Sachs views as a potential source of World Cup-related job gains.
Goldman Sachs describes this effect as "at least modest" support for hiring. In other words, the World Cup has not reversed the overall hiring slowdown but may be sufficient to alter the marginal performance of the June non-farm payroll report. Additionally, Goldman Sachs notes that the June employment data itself might have a tendency for initially high readings. The bank points out that while initial June non-farm payroll readings in past years have shown an upward revision bias, over the last four years, the initial June figures were ultimately revised downward.
Therefore, the key to interpreting the June employment report will be distinguishing between two types of signals: short-term job additions in event-related sectors and cities, and the hiring momentum in the broader economy. Goldman Sachs' forecast suggests the World Cup may make the employment data appear stronger, but the overall hiring pace still shows a slowdown compared to May.
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