Goldilocks jobs report for June would be ‘just right’
New York (July 3) If there was ever a time for a Goldilocks-style U.S. jobs report, now is it. Investors and Federal Reserve honchos would like to see a rebound in job creation in June, but after the unsettling U.K. vote to leave the European Union, they’d prefer a employment report that’s not too hot and not too cold.
In other words, just right. For June, “just right” looks to be around 175,000 to 200,000 new jobs. Such a gain would reflect a marked improvement upon tepid employment gains of 38,000 in May and 123,000 in April. The U.S. added an average of 81,000 jobs a month from March to May, the weakest three-month stretch since 2010.
A just-right jobs report would offer more evidence that the economy has recovered from an early-year swoon, but it would not be so strong as to put more pressure on the Fed to raise U.S. interest rates so soon after the “Brexit” vote.
“In that scenario the Fed is not going to feel it has to rush to do anything,” said Steve Blitz, chief economist at ITG Investment Research. “Their nightmare right now would be seeing employment , wages and inflation accelerate right as the Brexit uncertainty hits the marketplace.”
Senior Fed officials readily acknowledge the surprise Brexit vote can’t be ignored. The decision could throw another wrench into the global economy and depress world trade if uncertainty persists.
“The consequences of last week’s decision by U.K. voters to exit the European Union are on everyone’s mind,” said Loretta Mester, president of the Cleveland Federal Reserve, in a speech in London.
Still, Mester and others such as St. Louis Fed President James Bullard stressed the impact on the U.S. is likely to be small, at least for now. Sure enough, U.S. stocks have mostly recovered after steep losses following the vote.
Investors will get additional clues on what Fed insiders are thinking when the central bank on Wednesday releases a summary of its last big meeting in mid-June. The Fed left its benchmark short-term interest unchanged. Fed Chairwoman Janet Yellen also sounded surprisingly cautious after a more upbeat tone just a few months earlier.
What might complicate how Wall Street responds to the June employment report is the return of more than 30,000 Verizon Communications workers who were on strike in May. They’ll be added back to the June report and inflate the headline number.
Another problem: A low number of businesses answered the government’s employment survey in May. Some economists believe it contributed to the meager 38,000 employment gain.
“To the extent the unusually low response rate to the May survey was a factor, there could be a sizeable revision to the weak initial estimate of job growth in May,” said Richard Moody, chief economist at Regions Financial.
To Blitz, the welter of conflicting and confusing numbers reflect the U.S. and global economies at large. “We have now entered the era of ‘The Great Uncertainty,’ ” he said.
Source: MarketWatch
