The Fed has spoken. It's payrolls turn next
Main U.S. indexes red; Nasdaq hit hardest, down >2%
Real Est leads S&P sector gainers; Tech weakest group
Dollar up; gold slips; crude off ~1%; bitcoin off ~3%
U.S. 10-Year Treasury yield slides to ~3.98%
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THE FED HAS SPOKEN. IT'S PAYROLLS TURN NEXT
Federal Reserve Chair Jerome Powell had told reporters late Wednesday that "a rate cut could be on the table at the September meeting" if the data on inflation and the jobs market keeps coming in as expected.
No doubt those comments will inform investor reactions to the July payrolls report, due out before market open on Friday.
Goldman Sachs economists led by Jan Hatzius outlined their expectations for the hotly anticipated report.
Hatzius and co see July non-farm payrolls growth of 165,000, below consensus expectations for 175,000. The prior month came in at 206,000, according to LSEG data.
And they estimate that private payrolls increased in July by 125,000 vs consensus expectations for 148,000.
"While an influx of labor supply at the start of summer typically leads to an acceleration in seasonally-adjusted job growth when the labor market is tight, alternative measures of job growth indicate a pace of job creation below the recent payrolls trend," according to the report which also involved Goldman's Ronnie Walker and Jessica Rindels.
The economists' estimates assume a 15,000 drag from Hurricane Beryl, which made landfall in Texas on July 8 causing power outages and temporary business closures.
Goldman's estimate for the unemployment rate is in line with consensus at 4.1% reflecting an expectation for higher household employment and a flat participation rate of 62.6%. But the economists note risks to the estimate.
"While continued, albeit slowing, above-trend immigration could apply further upward pressure on the unemployment rate, catch-up of household employment toward nonfarm payrolls after a period of underperformance (even after adjusting for the household survey’s undercounting of immigration) would argue for downward pressure," according to Goldman.
They estimate an average hourly earnings increase of 0.3% month-over-month, which would cut the year-over-year rate by two tenths to 3.7%, in line with consensus and steady with June.
While July's calendar make up should weigh on hourly earnings, "the impact of Hurricane Beryl could boost them, as reported hours typically fall more sharply than earnings during severe weather events," the economists said.
(Sinéad Carew)
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