Zeev's Turnips Patch-No Politics (ZEEV)

[Dave Sissom]

This is free from MG Financial group.

The headline unemployment rate is expected to hold steady at 5.6%. Consensus forecasts are calling for the key non-farm payrolls number to increase by 230k, versus 112k in June. Any number above 250K is seen dollar supportive while anything below 200K should be a clear negative. Bullishness may escalate further if the unemployment rate falls to 5.5%, which many economists see as a possibility. Our argument for expecting a weaker 140-150K is the retreat in the employment indices of the July ISM indices on both services manufacturing AND services, as well as the decline in the July Chicago PMI. A pick-up of weekly jobless claims of about 40K from its 3-year low 3 weeks ago also explains our forecasts. Markets should also watch the average hourly earnings figure for inflationary components. If we see a decline back to 0.1% from 0.3%, then that suggests slowing pay and falling risks of inflation, i.e. dollar negative.