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Review our US July Employment Data Preview Report, where we analyze potential outcomes and offer a concise trading plan to navigate the upcoming data release. But let’s recap some of the most relevant recent data readings!


The June JOLTS (Job Openings, Labor Turnover) report from last Tuesday indicates that there are 1.6 job openings for every unemployed person (bottom panel). Although this number has decreased from its peak near 2, it still surpasses pre-pandemic levels.

The number of people quitting their jobs is declining, but it remains higher than any pre-pandemic levels. In other words, there are still unprecedented amounts of voluntary job separations, surpassing anything seen before 2020.


After seeing a decline in the Manufacturing ISM/PMI employment data, everyone thought ADP’s employment report for July would slow down significantly from June’s huge 497k addition, which was boosted by gains in the consumer-facing service industry. Markets were expecting a more ‘reasonable’ 190k addition. However, to everyone’s surprise, ADP’s Employment Report showed a much better-than-expected 324k addition in July, and June’s number was also revised upwards to 455k. Quite the twist! 📈

ADP may not be an exact punctual indicator of the montrhly NFP data prints, but when you step back and look at the bigger picture, it shows that the job market is holding up pretty well. So, when it comes to forecasting the next NFP (Non-Farm Payroll) number, you gotta keep an eye on this data! 🌟

Breakdown by company size in the table below!

The job growth was primarily driven by small and mid-sized companies, while large firms experienced layoffs. Maybe the market analysts overlooked the smaller players, and that’s why they consistently underestimated the job numbers over the course of the recent months. Could this trend repeat this time? Possibly.

Let’s take a look at the ADP number breakdown by industry in the following table !

Also, the strong job creation in the services sector might suggest that inflation pressures in services could stay high. This could have a significant impact on the core PCE (Personal Consumption Expenditures) and might make it stickier even after the recent drop.

Speaking of wage growth, the ADP report indicates that it’s slowing down. But let’s be real, the year-on-year median change is still quite high and well above what the FED would prefer to see for feeling confident enough to pause rates. It’s a crucial factor to keep an eye on as it can greatly influence the Fed’s next steps! 💰👀


The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 3.9 percent on August 1, up from 3.5 percent on July 28.

The current growth is robust and has shown recent signs of acceleration. This development further strengthens the belief that the chances of witnessing a weak employment number are not the most likely outcome.

Bottom Line

According to the forecast, nonfarm payroll employment is expected to increase by 200,000, which is slightly lower than the 209,000 job additions in June. The data is likely to show a moderation in the recent trend, maintaining a tight labor market and aligning with the current soft landing narrative. However, it’s essential to consider alternative scenarios in case the data surprises us again. Let’s evaluate a few possible outcomes!

Scenario I

If the NFP reading surprises with a blowout number (>300k), we anticipate that interest rates will break out of recent ranges, and the SEP 10y US Treasury Futures could trade in the 109 area over the next 5 trading sessions. The short term price action in rates could be sharp and the positioning seems to be long and crowded. The USD would likely reverse its recent depreciation trend, and the Dollar Index might resume its way back towards the 100 level. Stocks would face pressure as the narrative of a soft landing and Fed pausing would be challenged. In this scenario, we expect the Nasdaq to sell off around 5% over the next week, while the Dow and S&P500 would slightly outperform. Value style stocks and defensive sectors would outperform, but also be down. On the equity front, there might be limited places to hide.

Scenario II

If the job data is falling within the range of 100,000 to 300,000, we expect interest rates to stay stable, leading to a decrease in rates volatility. The 10Y Futures market might experience stagnation during the summer lull, following the recent mean reversion pattern. Although there could be a short-term equity rally, it is likely to lose momentum and trade near current levels in the next week. As for the USD, it is expected to continue its recent trend and might weaken slightly.

Scenario III

While the probability of NFP < 0k is not high, it should not be ignored due to the potential reversal in recent strong job creation data. In such a scenario, risky assets might undergo a sell-off, but the market could embrace a “buy on dips” strategy as weaker employment could strengthen the view that the FED is concluding its tightening campaign and may consider cutting rates later this or next year! As a result, rates would likely drop, although current positioning might limit the upside in the short term, probably around 20-25 bps over the next 5 trading days. The USD would be the primary target, leading the $index to gain momentum and consolidate in the 104/105 area over the next 5 trading days. EUR and JPY in particular would be my top picks!

I purposely excluded the scenario between 0k and 100k as it would likely fall somewhere between scenario II and III. The most probable outcome is the data falling in line with the projections. However, if I had to select the most likely alternative scenario, I would opt for scenario I given the US economy is showing evidence in many areas of being strong and actually picking up steam!

Happy trading and see you in the next post!



All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site and there is no guarantee for completeness or accuracy. The content is food for thought and it is not meant to be a solicitation to trade or invest. Readers should perform their investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.

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