Big Truth Coming

July 04, 2023 • Estimated Reading Time: 5 minutes

Macro Markets

The biggest event this week after a low volume 4th of July weekend will be on Friday with non-farm payrolls. The Department of Labor is expected to announce that hiring slowed from 339,000 observed in May to approximately 200,000. There are further employment data this week with Jolts and ADP as well, but non-farm payrolls is the big kahuna. The unemployment rate is forecasted to be unchanged at 3.7%, and average hourly earnings are forecasted to rise by 0.3% and 4.1%.

Employment has continued to break expectations all year, making the Fed's job of curbing inflation extremely hard. It is the most important thing for the Fed at the moment, as employment is running hot if it keeps printing above 200k consistently. When the May payroll report was released, we saw a bumper number again. This time 339k, with April revised up to 294k. It also presents a problem for the Federal Reserve in the context of whether to stick or twist when it comes to more rate hikes in the coming months.

We’ve already seen a pause in June, however, the commitment to raise rates by another 50bps by year-end has got markets a little nervous, driving yields higher at the short end of the yield curve. For June, forecasts are a number below 300k, at 213k. We did see a rise in the unemployment rate from 3.4% to 3.7%, while the participation rate remained steady at 62.6%. Wages also remained steady at 4.3%. We also know that job vacancies, after briefly dipping below 10m in March, rose strongly again in April to 10.1m.

For the Fed to fully pivot, the print needs to come in under 200k consistently, and the unemployment rate must go above 4%.

In terms of the market impact, you want to see consensus as a big drop-down could spook big recession fears, and any massive move-up could spark more hikes. More in the Wizards musing ahead.

‍

Become a member today and read the complete newsletter…

Have a friend? Share the Weekly Wizdom Newsletter and win exciting perks and rewards but most importantly you’ll make your friend smarter, Kudos to you!

Disclaimer Wizard of Soho LLC and Weekly Wizdom publish financial information based on research and opinion. We are not investment advisors, and we do not provide personalized, individualized, or tailored investment advice, nor do we provide legal advice or information. The publisher does not guarantee the accuracy of the information provided on this page. All statements and expressions present are based on the author's or paid advertiser's opinion and research. No opinion, directly or indirectly, is an offer or solicitation to buy or sell the securities or financial instruments mentioned. As news is ever-changing, the opinions included should not be taken as specific advice on the merits of any investment decision. Investors should pursue their own investigation and review of publicly available information to make decisions regarding the prospects of any company discussed. Any projections, market outlooks, or estimates herein are forward-looking and inherently unreliable. They are based on assumptions and should not be construed to be indicative of actual events that will occur. Contrarily, other events that were not considered may occur and significantly affect the returns or performance of the securities discussed herein. The information provided is based on matters as they exist on the date of preparation and do not consider future dates. As a result, the publisher undertakes no obligation to correct, update, or revise the material in this document or provide any additional information. The publisher, its affiliates, and clients may currently or foreseeably have long or short positions in the securities of the companies mentioned herein. They may therefore profit from fluctuations in the trading price of the securities. There is, however, no guarantee that such persons will maintain these positions. Unauthorized reproduction of this newsletter or its contents by photocopy, facsimile, or any other means is illegal and punishable. Neither the publisher nor its affiliates accept any liability for any direct or consequential loss arising from any use of the information contained herein. By using the site, or any affiliated social media account, you are giving your consent and agreeing to this disclaimer and our terms of use.