(July 5 – 11:30 ET) – With most economists waiting for Friday’s employment reports for signs of true economic slowing, BMO Nesbitt Burns Inc. senior economist, Dr. Russell Sheldon, warns that the data will likely be misleading.
Sheldon says that labour markets are ultra-tight and to believe anything else based on some economic stats could be dangerous. “The June employment report could potentially create a false impression that U.S. labour markets softened during the spring months,” he says. Sheldon says there was a big drop in jobs in May and that is bouncing back, although it may not all be felt in May. Nevertheless, he argues both the Fed’s recent Beige Book and private surveys both indicate that the market is still really tough.
Seasonal factors and census hiring in the U.S. are making the data tricky to interpret. Nevertheless, BMO Nesbitt predicts that the report will show total payrolls up 210,000 and private payrolls up 230,000. It also expects a moderate bounce in hourly earnings and a drop in the jobless rate to 4%. These numbers will leave May and June far below trend, but Sheldon expects a stronger bounceback in July data.
BMO Nesbitt says that if the data comes in as weak as expected it likely reveals a lack of available workers, not fewer jobs. It suggests that its view will likely be contrarian, “Thus, we would expect the markets to react favorably to numbers as soft as ours. We recommend taking advantage of any price rise to sell. Soft jobs figures simply do not reflect reality.”
-IE Staff