No great expectations for US jobs data

Date: Friday 06 Jul 2012

June’s US Employment Report may well round off the weakest quarter for the American labour market in the last two years if job creation settles in line with current market expectations.

The government report will be published on Friday at 13.30 London time and the consensus is looking for the addition last month of 106k jobs to non-farm private payrolls. If this prediction comes true it would mark the end of what was the worst labour market performance since the first quarter of 2010.

The unemployment rate is expected to stand firm at 8.2%. It has remained above 8% for the last three years and not even the Federal Reserve is expecting a grandiose improvement this year. Indeed, the Fed inched up its latest forecasts for the fourth quarter to between 8% and 8.2%.

As a general rule of thumb, economists say that the American economy needs to create at least 200k payrolls in order to pull down the unemployment rate.

Hence, although the 106k estimate is a leg up from the shockingly low 69k jobs created in May, it still remains a far cry from the amount needed to allow unemployment to recede. Royal Bank of Scotland (RBS) strategists do note that they think “the whisper number (trader expectations talked about on the floor and thus ‘priced in’ as compared to the economists’ forecasts) is closer to 110k-120k.”

Experts have recently been ratcheting their numbers up. For example, just last Thursday Goldman Sachs upped its estimate to 125k from the prior 75k, but in any case, RBS thinks it’s a moot point. According to the Scottish bank, any number between 80k and 130k won’t move the market.

JM

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