What to Expect…
August 5, 2021
Consensus expectations for tomorrow’s release of non-farm payrolls is now +862,500. Consensus for the Unemployment Rate is 5.7% (down from 5.9% in June), an unchanged average workweek at 34.7 hours and a +0.3% month-over-month increase in wages/+3.9% year-over-year (vs. +0.3% and +3.6% in June). Whisper expectations for non-farm payrolls have declined following yesterday’s ADP disappointment to something like +700,000, but anything north of +600,000 and below +900,000 would be considered an inline report. A large miss in the +300,000 to +350,000 range would likely result in sharp, but short-lived Treasury and NDX rally, while something in the +400,000 to +550,000 range would produce a similar but more subtle market reaction. Anything close to the ADP report (+300,000-$400,000) would likely result in an SPX pullback (~5% to technical support near ~4200). Why? After to listening to Fed officials this week, none of the aforementioned scenarios would likely deter the central bank from Q4 tapering. A payroll add below +200,000 could push tapering into 2022, but the discussion is really more about how much/how fast with consensus looking for asset purchases to shrink by $15B, while some Fed officials have suggested $30B. And a print north of +900,000 would take consensus closer to a $30B tapering pace, result in higher bond yields (10-year Treasury to 1.28%-1.30%), a sell-off in the NDX and a sustained rally in cyclical/value sectors, particularly banks.