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The United States June non-farm payroll is expected to rise, with growth in jobs remaining on a modest scale. Non-farm payrolls is expected to have increased 150,000 in June, which is a little lower than consensus at 175,000, but significantly higher than the May figure of 38,000. Hence, jobs growth in June is expected to have rebounded from the low level in May.
Leading indicators point to slower, but solid job growth. The Markit PMI employment index still points to a modest job growth and initial claims figures have averaged lower in June than in May, indicating that job growth has rebounded in June, Danske Bank reported.
"We see the May jobs report more as a 'one off' rather than a new normal, although it magnifies the signal that job growth has indeed slowed lately," the report mentioned.
Moreover, average hourly earnings is expected to have increased 0.2 percent m/m in June, in line with the recent trend, implying an annual growth rate of 2.7 percent, the highest since the crisis. Further, unemployment has taken a dip of 4.7 percent in May, down from 5.0 percent in April, owing to fall in the participation rate. The figure in June is expected to reverse a little, to 4.8 percent.
On the data front, the PMI service index continues to be at a low level in June, while consumer confidence showed strength, with a sharp jump in the Conference Board index and Michigan figures continuing at high levels.
"We think the service sector will continue to grow at a solid pace over the coming months with employment growth to continuing at solid levels," the bank report further mentioned.
In addition, manufacturing employment is expected to have decreased marginally by 10,000 in June, as some headwinds for the manufacturing sector, coupled with slow growth in China, a strong dollar and low oil investments have weighed on the sectoral performance. On the flipside, the ISM manufacturing employment index for June is likely to have risen to 50.4 last week suggesting a stabilization in manufacturing employment.
"We estimate construction employment increased 10,000 in June, as we see some possible correction from the last two months with declining construction employment," Danske Bank further reported in a research note.
