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Next Friday, the US official employment report is due. Analysts at CIBC, forecast an increase in non-farm payroll of 5 million. They warn about not getting too excited about a big employment rise, as total payrolls would remain some 15 million below pre-Covid levels.

Key Quotes: 

“Other high-frequency employment data show a further improvement to mid-June (no surprise there), but more noteworthy suggest that by mid-June the labour force had recovered pretty much half of the ground lost between March and April. That would imply a rise of 6.5 million in employment on top of the 2.5 million gain in May. Of course, we don’t know how accurately such data account for business closures, and they could also be capturing an increase in working hours among existing employees (although that seems less likely this time given the rise in average working hours last month). However, even scaling back to a 5 million gain still leaves us above the consensus.”

“We won’t be getting too excited about such a big employment rise, as total payrolls would remain some 15 million below pre-Covid levels. And it won’t be smooth sailing from here. With case counts rising again in many states, there’s the threat of physical distancing measures being re-imposed. And even if that doesn’t happen, some businesses may not be able to survive in the current environment. As such, we could see choppy payrolls figures from here, with some declines mixed into a much more gradual positive underlying trend.”

“A strong payrolls figure could see investors pricing in a more “V” shaped recovery again, which would take the US$ weaker and bond yields/ equities higher. However, we expect the ADP survey the day could give the game away and see an even bigger “gain” in jobs.”