Economy Expected To Have Added 3.5 Million Jobs In June

Economic Expectations

Thursday is a big day for labor data. Let's look at a few estimates for this. We are getting the BLS monthly labor report and weekly jobless claims. It will be curious as to how the recent spike in COVID-19 cases impacts jobless claims. We might need to wait a couple more weeks to get a complete picture which means it’s possible we get a good report after we had 2 bad ones in a row.

Specifically, estimates are for initial claims to fall from 1.48 million to 1.4 million. That wouldn’t be a great decline. That’s a 5.4% decline which would be better than the past 2 reports, but nothing to signal the labor market is suddenly getting better at a much quicker rate. 

This consensus implies some cautiousness but doesn’t expect the hot spots for COVID-19 to run the data off track. That’s fair as weakness should show up in the following report. If this report misses estimates, it will be terrible. It will signal the labor market is struggling to improve. That would be a 3-week trend of poor improvement.

Consensus for the June BLS report is for 3.5 million jobs created which would be above last month’s 2.51 million jobs added. This leads to the unemployment rate falling to 12.4% from 13.3%. When asked to pick whether it will miss or beat estimates, we would say I expect a miss. This is obviously a very tough report to predict. 

The only month that was harder to predict was last month where results wildly missed estimates. That won’t happen again. Barclays expects 2 million jobs added, JP Morgan expects 3 million, and RBC expects 8 million. RBC will likely be very wrong and the other 2 will be close.

A guess for the stock market’s reaction is that a small miss will be ignored and a large beat will lead to a rally. It’s unlikely that stocks sell-off on Thursday. Way more people will be paying attention to markets this Thursday than usual. This isn’t a normal day before a holiday weekend. This is the 2nd most important labor report of the cycle. It could even be the most important if job creation misses estimates to the downside.

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