After a frenetic week of G7 interest rate cuts, new records for stocks, another scramble for AI and a wave of elections, world markets have frozen awaiting the U.S. employment report.
The May payrolls report comes just ahead of next week’s Federal Reserve meeting and most of the labor market updates in recent days have indicated a gradual cooling in employment.
For the record, consensus forecasts indicate non-farm payrolls growth picked up a touch last month to 185,000 from 175,000 in April – and the monthly rise in average earnings also ticked higher to 0.3%.
But the unemployment rate is set to remain at 3.9% and if that holds, Deutsche Bank strategists point out, it will mark the 28th month below 4% – the longest such stretch since the 1950s.
It would have to be a shocker for recession alarm bells to sound and would need to jump as high as 4.3% to trigger the oft-cited “Sahm rule”. Developed by former Fed economist Claudia Sahm, it suggests a recession red flag if the rolling three-month average jobless rate rises half a point above the low of the prior 12 months.
But the cooler labor market seen this week in weekly unemployment claims, falling vacancies and a contracting service sector jobs components has already seen Fed rate cut expectations revived to two quarter-point moves this year, starting in September.
And 10-year Treasury yields are hovering at two-month lows and the dollar is on the back foot near eight-week lows too.
MSCI’s world share index stalled in advance of the report after touching an all-time high on Thursday and Wall Street stock futures were flat ahead of the bell.
Oil steadied as OPEC+ members Saudi Arabia and Russia indicated readiness to pause or reverse oil output increases, but crude was still headed for its third straight weekly loss on demand concerns.
