We expect headline job gains cooled to 85k in June against current market consensus of 113k. 2. There are two reasons for our subdued payroll forecasts. First being the fact that initial jobless claims were up 8.8% during the June survey week relative to May. Second reason is that we have noticed a pattern of subdued summer payroll gains at least relative to their January-May averages over the past couple of years. For example, average private payrolls from June – August of 2023 were roughly 32% below their January – May average. In 2024, the drop-off was even more pronounced with the average June – August private payrolls a little over 65% below their January – May average. The Conference Board labor differential has also ticked down to a new multi-year low. NFP has also been running above alternative measures of job gains, including household survey employment and ADP, adding further support to the case for a correction lower. We expect the unemployment rate rose to 4.3% in June, its highest level since October 2021. We expect AHE growth slowed to 0.2% m-o-m, reversing a surprising acceleration to 0.4% in May. Slowing job gains and a renewed uptrend in the unemployment rate will raise concerns about downside risks for the labor market. We believe that by Aug NFP we might see a sub 75k NFP no consistently which will push the employment mandate of Fed into stronger focus over it’s inflation mandate. The neutral rate for NFP for us is 75k below which consistent readings will put more pressure on neutral members of FOMC to lean dovish and cut rates by 25 bps each in Sep & Dec followed by 3 more rate cuts of 25 bps each in H1CY26.
