Due to the US Independence Day holiday, the US June non-farm payrolls report will be released early, at 20:30 Beijing time on Thursday. Following the surprising surge of 172,000 new jobs in May, the market is holding its breath.
Currently, the consensus forecast on Wall Street for June's job additions is 110,000, representing a significant slowdown from May's 172,000. The unemployment rate is expected to hold steady at 4.3%, while the month-over-month growth in average hourly earnings is projected to remain around 0.3%.
The previous month's data was robust, not only adding 172,000 jobs but also seeing upward revisions totaling 93,000 for March and April, pushing the three-month average job gain to 188,000. However, Westpac noted that employment growth in the household survey remains weak, the unemployment rate has not declined, wage growth is moderate, and the data shows internal divergence.
A notable characteristic of the current US labor market is that businesses are neither hiring aggressively nor laying off workers on a large scale. Total employment continues to grow, but the hiring rate is below historical norms, while layoffs remain relatively rare.
Indeed economist Sneha Puri explained this dynamic, stating, "This is not contradictory. Current job growth stems more from a historic decline in the quit rate rather than an increase in hiring activity." She further pointed out, "Fewer people are losing or leaving their jobs, but new job opportunities have not increased significantly."
This structural shift means the momentum for employment expansion is not coming from active recruitment by companies but relies more on job retention.
Regarding the June data, the market is focused on two key questions: whether the job market continues to tighten after May, and whether May's strong performance was influenced by one-off factors, particularly temporary demand related to the World Cup.
This will directly impact interest rate expectations. The current stabilization in the US labor market has reduced the necessity for the Federal Reserve to continue cutting interest rates. Unlike last year's rate cuts, financial markets now widely anticipate that the Fed may raise rates at some point this year to address inflationary pressures. However, if employment unexpectedly weakens, this expectation could reverse quickly.
Sal Guatieri, a senior economist at BMO Capital Markets, noted, "To avoid raising rates, the Fed might need to see softer employment data in the second half of this year."
Goldman Sachs has issued a forecast of 130,000, higher than the consensus. This figure includes 40,000 temporary World Cup-related positions and the typical annual June overestimation of 45,000 jobs in government education. Stripping out these noise factors, the underlying trend in US employment might have slipped toward a precarious level below 90,000.
New Federal Reserve Chair Wash and his colleagues face a dilemma: on one side is employment that, while slowing, still shows resilience; on the other is persistently sticky wage growth.
White House economic advisor Hassett recently stated that, based on "all the signs we see," this jobs report could show "another strong reading." He also noted that if disruptions related to the Strait of Hormuz ease and lead to a decline in energy prices, overall inflation could fall significantly. Additionally, investments in artificial intelligence, manufacturing reshoring, and domestic energy production continue to support the US economy.
The global economics and markets research team at the Commonwealth Bank of Australia (CBA) believes this data presents upside risks for the US dollar against the Japanese yen. If employment again exceeds expectations, the market may raise interest rate expectations, pushing the exchange rate toward 165.
Analysts believe this level will test the Japanese authorities' resolve to defend the yen. Since both the unemployment rate and wage growth are expected to remain broadly stable, the overall employment figure is likely to be the primary driver of market reaction on the day.
Alan Long, a US stock analyst at TradingKey, said, "The ideal scenario would be non-farm payroll growth of around 100,000 to 120,000, a stable unemployment rate, and no acceleration in wage growth. This would reinforce expectations for a soft landing, support risk appetite for tech and high-valuation growth stocks, and provide fuel for the Nasdaq to continue its rise."
Alan pointed out that if non-farm payrolls significantly exceed 150,000 and wage growth continues to heat up, tech and high-valuation stocks would face downward pressure as rising rates compress valuations. Conversely, if non-farm payrolls fall significantly below 50,000 or the unemployment rate rises above 4.5%, the market might initially bet on rate cuts but would then shift to concerns about earnings downgrades, which would also pressure US stocks.
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