US NFP Prep

On Friday, August 7th at 08:30 ET, the BLS releases the US Employment Situation for July, including Nonfarm Payrolls, Unemployment Rate, and Average Earnings.
Here are some views on what to expect.

Overview
Nonfarm Payrolls – Forecast: 80k | Prior: 57k | Range: 157k / 40k
Unemployment Rate – Forecast: 4.2% | Prior: 4.2% | Range: 4.3% / 4.1%
Average Earnings YoY – Forecast: 3.5% | Prior: 3.5% | Range: 3.6% / 3.4%

What to Expect
US Stocks
A balanced report, with payroll growth close to expectations, stable unemployment, and moderate wage growth, would likely be the most supportive outcome for equities. Exceptionally strong job gains or faster wage growth could raise concerns that the Federal Reserve will keep policy restrictive for longer, while a much weaker report could weigh on stocks by increasing fears of an economic slowdown.

US Dollar
A stronger-than-expected employment report, particularly if accompanied by firm wage growth, would likely support the dollar by reinforcing confidence in the resilience of the US economy. Conversely, weaker payroll growth, rising unemployment, or softer earnings would likely pressure the dollar as markets increase expectations for a more accommodative Federal Reserve policy path.

US Government Bond Yields
Treasury yields would likely rise following stronger payroll growth and robust wage gains, as investors price greater inflationary pressure and a more restrictive Fed outlook. A weaker report, particularly if unemployment rises and wage growth slows, would likely push yields lower.

Federal Reserve Policy
The Employment Situation Report remains one of the Federal Reserve’s most important inputs when assessing progress toward maximum employment and price stability. Policymakers will focus not only on the headline payroll figure, but also on the unemployment rate, labour force participation, revisions to prior months, and wage growth. A resilient labour market with persistent wage pressures would support a higher-for-longer policy stance. Conversely, evidence of slowing hiring, rising labour market slack, and easing wage growth would strengthen the case for a more accommodative policy path

Commentary
Deutsche Bank
July payrolls are expected to rise slightly, with headline employment increasing by 65,000 after 57,000 previously and private payrolls also up 65,000.
Average hourly earnings are forecast to remain at 0.3% month-on-month, while hours worked should stay at 34.3, leaving the year-on-year growth rate of the payroll-based nominal income proxy unchanged at 4.4%.

The unemployment rate is expected to hold at 4.2%, though risks are tilted toward a rise to 4.3% if labour force participation rebounds more strongly.
Participation fell sharply last month, helping lower the unemployment rate, while household employment was hit by an unusually large decline among Hispanic workers, particularly women. Recent changes to the legal status of some immigrant groups may mean that participation within this cohort does not fully recover.

UniCredit
For July, we have pencilled in a renewed acceleration in job creation, to 110k, broadly in line with the three-month average.
We expect the bulk of new hiring to be recorded in business services and health care, while employment in leisure and hospitality is unlikely to have rebounded meaningfully as World Cup-related hiring unwound.
The unemployment rate probably held at 4.2%, with risks tilted to the upside if participation recovers somewhat. Average hourly earnings probably continued to grow at 3.5% YoY, which is unlikely to be inflationary given that productivity is increasing rapidly.
Overall, the US economy remains in a low-hire, low-fire environment.

Previous Release
In the previous report (June), the US labour market slowed noticeably, with hiring falling well short of expectations, although the unemployment rate edged lower as labour force participation declined. Wage growth remained steady, suggesting underlying labour market conditions were cooling but not deteriorating sharply.

The report showed:
Nonfarm payrolls increased by 57,000, the weakest monthly gain in several months, while prior months were revised lower.
The unemployment rate fell to 4.2% from 4.3%, though the decline was largely driven by a drop in labour force participation rather than stronger hiring.
Average Hourly Earnings rose 0.3% on the month and 3.5% from a year earlier, indicating wage growth remained moderate despite softer job creation.
Labour market conditions pointed to a low-hire, low-fire environment, with employers remaining cautious about adding staff while layoffs stayed historically low.

Overall, the June report suggested the labour market continued to cool gradually rather than weaken abruptly, with softer hiring offset by still-resilient wage growth and relatively low unemployment.

This slower employment report caused a dovish reaction, with weakness in USD & Bond Yields, and strength in the S&P 500