“We look for a fairly neutral jobs report, with a solid but slightly below-consensus print on payrolls, a dip in the unemployment rate and modest wage gains. We expect payrolls to bounce back by 190k in August as the prior moderation in services unwinds,” TD Securities analysts point out.
Key quotes
“Solid growth should continue to be underpinned by strength in goods-producing jobs, in line with ISM jobs indicators. However, August payrolls tends to underperform ADP as well as consensus forecasts, so we lean against a strong +200k print. On the back of the solid trend in payrolls (221k 6m average), we expect the unemployment rate to dip back to previous lows of 3.8%.”
“On wages, we expect average hourly earnings to rise 0.2% m/m, keeping the y/y pace at 2.7%. The reference week (with the 12th of the month landing on a Sunday) implies a weak m/m point though also a wide dispersion (-0.1% to 0.4%). Given that the prior July increase was relatively strong (0.3%), we are biased toward a relatively modest August rise.”
“Our modestly below consensus expectation on topline job growth has us leaning towards a softer USD through the report. Barring a shock development in the political space (trade talk for example), our view reflects a combination of factors; a lot of good news is in the price as far as the USD is concerned as data surprises/momentum has ebbed relative to its G10 peers, and long USD positioning build is rather sizable, which has helped to push USD valuations fairly rich across the board.”
“As a result, we think the USD will be more reactive to a miss in jobs rather a beat, particularly given the tendency for payrolls to underwhelm forecast expectations in August. This could lend support across the board for the majors, but we think the USD squeeze could be concentrated against the dollar bloc (AUD is nearly 4% cheap by our measure of HFFV) and the JPY.”
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