Wall Street enters the heart of a labor-market data week with equities near record highs and an unusually direct line running from Friday's jobs report to the Federal Reserve's September decision.
The Bureau of Labor Statistics will release the July employment situation report on Friday, August 7, at 8:30 a.m. Eastern. Analysts surveyed by Continuum Economics expect nonfarm payrolls to rise by 120,000, with private payrolls up 110,000 — a marked improvement over June, but one the firm notes is "largely explained by a recovery in leisure and hospitality" rather than broad-based strength. The unemployment rate is expected to tick up to 4.3% from 4.2%, with average hourly earnings rising 0.3%.
June Set a Low Bar
The bar is low because June was weak. The U.S. economy added just 57,000 jobs in June, well short of the 110,000 economists had forecast and down from a downwardly revised 129,000 in May, according to Trading Economics. That combination — a miss on the headline plus a downward revision to the prior month — is the pattern that has repeatedly forced the Fed to reassess how much slack has quietly opened up in the labor market.
A 120,000 print would steady the three-month average. A second consecutive figure near 57,000, paired with unemployment climbing to 4.3%, would tell a different story.
A Full Week of Labor Data
Friday is the main event, but it is not the only one. Tuesday brings the Job Openings and Labor Turnover Survey, along with the trade balance and factory orders. Job openings hit a two-year high of 7.6 million in May, with hires at 5.2 million, per BLS data; Kiplinger reports economists expect June openings to come in slightly lower month over month.
Wednesday pairs ADP private payrolls with the ISM services index — which Kiplinger flags as potentially the week's most important inflation read outside of payrolls, since services prices remain central to the Fed's inflation concerns. Thursday delivers initial jobless claims plus preliminary productivity and unit labor costs, the latter a direct input into wage-driven inflation models.
Why the Fed Is Watching
The Federal Open Market Committee held its benchmark rate steady at a target range of 3.50% to 3.75% at its July meeting. Attention now turns to September 16, where CME FedWatch showed a 54.4% probability of a 25-basis-point cut as of July 28 — close enough to a coin flip that incoming data carries real weight.
That leaves the Fed threading a familiar needle. A soft payrolls number strengthens the case for easing but raises questions about the growth outlook. A hot number, particularly alongside firm average hourly earnings and unit labor costs, would push a September cut further out of reach. The July CPI report, due August 12, will supply the other half of the picture.
Markets Are Priced for the Good Outcome
Stocks are entering the week with little cushion for disappointment. The Dow Jones Industrial Average closed Monday at 53,178.41, up 693.38 points or 1.32%, while the S&P 500 gained 1.48% to 7,600.50 and the Nasdaq Composite rose 2.1% to 25,913.9, according to Bloomberg and CNBC. Amazon climbed 4.6% to surpass a $3 trillion market capitalization for the first time.
Much of that rally was driven by easing Middle East tensions and solid corporate earnings rather than the domestic economy. With indexes at records and the September decision near a coin flip, Friday morning is where the macro narrative gets tested.
Sources: Bureau of Labor Statistics, Kiplinger, Continuum Economics, CME FedWatch Tool, Bloomberg, CNBC, Trading Economics