Preview: June non-farm payrolls by the numbers — the headwinds are beginning to blow

What’s expected:

• Consensus estimate +190K (Goldman Sachs at the low at +140K, FAO Economics at the high at +250K)
• May +272K vs +185K expected
• Private +160K estimate vs +229K prior
• Unemployment rate consensus estimate: 4.0% vs 4.0% prior
• Participation rate: 62.5% prior
• Prior underemployment U6 7.4%
• Avg hourly earnings y/y exp +3.9% y/y vs +4.1% prior
• Avg hourly earnings m/m exp +0.3% vs +0.4% prior
• Avg weekly hours exp 34.3 vs 34.3 prior

June jobs so far:

• ADP report +150K vs +160K expected and +157K prior
• ISM services employment 46.1 vs 47.1 (third-worst since pandemic)
• ISM manufacturing employment 49.3 vs 51.1 prior
• Challenger job cuts 48.8K vs 64.7K prior (four month low)
• Philly employment -2.5 vs -7.9 prior (five month high)
• Empire employment -8.7 vs -6.4 prior
• Initial jobless claims survey week 239K (highest since Aug 2023)

I will be watching private payrolls much more closely than the headline as the JOLTS report has been indicating stronger government job openings and last month, government added 43K jobs.

Seasonally, 52% of June reports have missed esimates and 48% have beaten them, so there isn’t much skew. Though the average miss is 66K and the average beat 54K. The unemployment rate has seen above-consensus readings 42% of the time and below 27% with the remainder matching estimates.

In light of this report, people are talking about the Sahm Rule. Currently the three-month average of the unemployment rate is 0.37 percentage points above the minimum of the three-month moving average in the past year so we’re watching to see if that hits 0.50. I’m not a hard-and-fast believing in this kind of rule but it could get some talk if unemployment is higher.