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Eyes down for the latest US Payroll release


Eyes down for the latest US Payroll release

It doesn’t seem that long ago when we had the last update on US Non-Farm Payrolls. The report does seem to come round quickly these days. Maybe that’s because of the unusual circumstances most of us are experiencing as life stutters back to some version of “normality”. Anyway, it’s been a month since the last update and the July Non-Farm Payroll numbers will be released this Friday.

The expectation is for another substantial improvement, with the consensus hardening around a gain of 1.5 million jobs for the month. But this has already been revised down sharply from 2.3 million at the end of last week. If the current forecast is correct, this would represent a significant slowdown in the overall rate of improvement. We saw 4.8 million jobs added in June with 2.5 million additions in May. So put in that context, 1.5 million isn’t great. On the plus side, the data should still be going in the right direction. But the US is still a long way from replacing the 20.5 million jobs lost in April at the height of the coronavirus pandemic and the associated lockdown.

In fact, some analysts are worried that even the latest consensus forecast may still prove to be too high given the recent sharp increase in coronavirus infections across the US. This has led some states to reintroduce containment measures leading to additional business closures and job losses. But other observers have pointed out that the latest lockdown started in the second half of July. They argue that as the Non-Farm Payroll data is collected in the second week of each month, any lockdown re-introductions won’t be reflected in this data set.

The trouble is that on Wednesday we got the ADP Non-Farm Payroll release. This is a different piece of employment data as it excludes government positions and focuses on private employment. The ADP report hasn’t proved to be a great help in predicting how the official payroll number may come in. But it does have a good track record when it comes to anticipating big surprises. The latest ADP report showed an increase of just 167,000 jobs against an expected gain of 1.2 million. As this is one of the biggest surprises on record for this data set, the concern is that there will be a similar disappointment from Friday’s numbers.

It’s evident there’s a wide range of opinion here. Given the general uncertainty ahead of Friday’s release, it’s surprising there hasn’t been much chatter on social media so far. But a look at the Smart News weekly ‘Highlights’ feed shows exactly what the area of interest is currently for market participants, and that’s US corporate earnings. All week the feed has been dominated by commentary on the results from big corporations such as Disney, Tyson Foods and Coca-Cola.

A view of the City of London from the south bank of the Thames at night with river on foreground, 'Walkie Talkie' building on left and 'Gherkin' on left

Around half of the companies in the US S&P 500 have reported so far, with 80% of these beating estimates. This compares with around 65% of all reporting European firms. While some of the old corporate behemoths such as Caterpillar have posted decent results, it’s been the tech giants that have left the other stocks trailing with Apple and Facebook hitting fresh all-time highs, while Amazon reported its biggest profit ever.

That’s not all that social media is concerned about. This week investors have been keeping a close eye on Washington where Congress remains deadlocked over the next round of economic relief to help offset the economic damage of the pandemic. Last Friday tens of millions of Americans lost a $600 per week federal unemployment supplement after the White House and Congress failed to reach an agreement to extend the payments.

Congressional Democrats want to see these payments extended into next year as part of a broader package. But Republicans have said the $600 payments are an incentive to stay home rather than return to work. Their proposal would provide a lower weekly payment of $200 until states create a system to provide a 70% wage replacement for laid-off workers.

So perhaps it’s understandable that social media has been swamped with issues other than Non-Farm Payrolls. But we should expect that to change on Friday when the jobs number will be the main focus for traders and investors alike. By that stage it should dominate our Smart News ‘Highlights’ feed for this week. You’ll get updates from analysts, their latest forecasts and instant summaries, whether the number is good or bad. So, make sure you click on the Smart News widget in the bottom right corner of the trading platform. That’s where you’ll get alerted to the news first, along with the opinions of some of the most influential voices on social media.

 

 

 


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