NFP: A good report may put a brighter spotlight on the Fed’s phase-down speech

The US employment report will be released on Friday. The market consensus is a payroll increase of 650,000. According to Wells Fargo analysts, a weak report could reinforce expectations that the Federal Reserve will reduce its QE.

Key statements:

“The full reopening of the economy after a pandemic is not a continuous process and this was made clear in the April jobs report. Strong demand for labor as companies reopen and replenish staff collided with a series of restrictions on the supply of workers. Still, the April payroll figure stands in stark contrast to other labor market data. PMI employment indices, consumer views on the labor market and declining jobless claims suggest the economy should be adding jobs at a solid pace. “

“While we do not suspect that all the job supply problems resolved themselves in May, we believe that the job recovery returned to normal. We forecast that employers added 800,000 jobs during the month and the unemployment rate dropped to 5.9%. We will also pay particular attention to any revisions to the previous month’s data in next week’s release. “

“If employers add significantly fewer jobs than we forecast, it would appear that the disconnect between demand and supply of labor takes a little longer to work. A weak report could reinforce expectations that the reduction will not begin until early 2022, despite the recent increase in inflation. Alternatively, large upward revisions to previous data or a solid gain in May employment, particularly if accompanied by a significant April upward revision, may put a brighter spotlight on when the Fed can discuss and ultimately instance, start phasing out. “