US NFP Prep [Friday 5th June]

On Friday, 5th June, at 08:30 ET, the BLS releases the US Employment Situation Report for May.
Here are some views on what to expect.

General Expectations
Forecasts subject to change
Nonfarm Payrolls – Forecast: 85k | Prior: 115k | Range: 135k / 40k
Unemployment Rate – Forecast: 4.3% | Prior: 40.3% | Range: 4.5% / 4.2%
Average Earnings YoY – Forecast: 3.4% | Prior: 3.6% | Range: 3.7% / 3.3%

What to Expect
US Stocks
A stronger-than-expected report, with solid payroll growth and firm wages, could support equities by reinforcing confidence in economic resilience and consumer spending.
A weaker print may weigh on stocks, particularly cyclical sectors, as it signals slowing demand and softer labour-market momentum.
US Dollar
A robust jobs report would likely support the dollar, as it reduces expectations for near-term Federal Reserve easing.
A softer report may pressure the dollar, with markets leaning toward a more dovish policy outlook.
US Government Bond Yields
Upside surprises in payrolls or wages could push yields higher, reflecting firmer growth and inflation expectations.
Downside surprises generally lead to lower yields, as investors price in slower activity and increased odds of rate cuts.
Federal Reserve Policy
A firm labour report would support a patient or higher-for-longer Fed stance, particularly if wage growth remains sticky.
A weaker report, especially if unemployment rises or earnings soften further, would strengthen the case for a more accommodative policy path as labour-market slack builds.

Commentary
Bank of America
May payrolls are expected to show another solid increase, with nonfarm payrolls seen at 95k and private payrolls at 100k, comfortably above breakeven.
Education and health are expected to remain the main source of job gains, followed by trade and transport, while warm weather should continue to support leisure, hospitality, and construction.
With claims still benign and ADP data firm, the risks are tilted to the upside.
The unemployment rate is expected to hold steady at 4.3%, with participation also seen unchanged.

Credit Agricole
The labour market has shown signs of stabilising in recent months, and the May jobs report is expected to reinforce that trend. Nonfarm payrolls are projected to rise by 80k, which would be slower than the previous two months but still a solid pace in an environment where the breakeven rate for job growth has fallen sharply. The unemployment rate is expected to remain steady at 4.3%, with some improvement in household survey employment possible after a softer run.

Average hourly earnings are expected to rise 0.3% month-on-month, up from 0.2% in April. Even so, the year-on-year pace would slow to 3.4% from 3.6%, which would suggest wage growth is still easing gradually rather than reaccelerating.

CIBC
In the US, the upcoming jobs numbers won’t be good by the standards that prevailed two years ago, but good enough in these days of minimal population growth. While we’re a bit below consensus for payrolls in expecting an 80K gain, that’s still better than the recent trend, and we see the jobless rate remaining at a lean 4.3%.

So even if oil prices have indeed started a sustained descent, the Fed will be in no hurry at all to cut interest rates. If news on Iran continues to edge towards a deal, Fed speakers will temper some of their recent hawkishness, and it will be interesting to see if Barr addresses his opposition to shrinking the balance sheet given that Warsh is now on board.

Previous Release
On May 8th, the BLS released the April US Employment Situation Report
US Nonfarm Payrolls Actual 115K (Forecast 65k, Previous 178k, Revised 185k)
US Unemployment Rate Actual 4.3% (Forecast 4.3%, Previous 4.3%)
US Average Earnings YoY Actual 3.6% (Forecast 3.8%, Previous 3.5%, Revised 3.4%)

This caused weakness in USD and US bond yields, and strength in US index futures.