US labor market: weaker, but not weak – Commerzbank

Today is that time again – Payroll Friday. The first Friday of the month when, as is traditional, the US labor market report is published. According to Bloomberg, the consensus expectation is that the US economy created 126,000 new jobs in May. This would be significantly less than in the last two months, but would be roughly in line with the average for the last 12 months, Commerzbank's FX analyst Volkmar Baur notes.

Focus is on the unemployment rate and average hourly wages

"The JOLT survey published on Tuesday showed a surprising increase in job vacancies in April. And since this figure is always determined on the last working day of the month, this would certainly be a good sign for new jobs in May. The hiring rate also rose again in April to 3.5%, the best figure since last September. However, compared to the low unemployment rate, this figure is still quite low, indicating that the labor market remains sluggish."

"Yesterday, initial claims for the week ending May 31 rose to 247,000, the highest level since last October. The four-week average also rose, reaching 235,000, the highest level since last October. This means that initial claims were around 8% higher than in the same week last year. The year-on-year increase has thus accelerated significantly in the last two weeks, after averaging around 4.5% since the beginning of the year. The Conference Board's consumer survey also recently revealed that people feel that jobs are no longer as easy to find and that job vacancies have declined."

"All in all, a figure around or slightly below the consensus is unlikely to have a particularly strong impact on the EUR/USD exchange rate. An upward surprise, on the other hand, would certainly give the dollar a temporary boost. However, to put pressure on the greenback, the labor market would probably have to be significantly worse than expected. As always, the focus will be on the unemployment rate and average hourly wages, in addition to the number of new jobs created. However, if these figures are reported as expected, with the unemployment rate unchanged at 4.2% and hourly wages slightly lower, it will ultimately be the number of new jobs created that makes the difference."