All eyes on the Friday morning release of the June employment numbers by the Bureau of Labor Statistics.
Economists surveyed by Bloomberg are expecting a rebound from a weak May report to 700,000 net jobs added in June. May was a surprisingly weak 559,000 new jobs. Economists expect to see the official unemployment rate dip to 5.6% from 5.8% in May.
The ADP employment survey, which sometimes tracks the BLS numbers, is due for release on Wednesday so financial markets will have some indication of what they might see on Friday.
But the timing of the June jobs report is a little awkward for the financial markets. Stock markets are closed on Monday, July 5, in celebration of the July 4 holiday so the Friday report arrives just before a long weekend.
Recent volatility in the report–see the weakness in May, for example–will also make it tough to figure out how to position portfolios ahead of the long weekend.
Look for a move up in the CBEO S&P 500 Volatility Index (VIX), perhaps, as investors and traders buy some hedges against a Friday surprise. And look for volatility in the stock and bond markets on Friday.
The consensus is that a strong employment report might increase the odds that the Federal Reserve will move to tighten monetary policy sooner rather than later. A week report will keep the Fed on the sidelines. But too weak and markets might start to worry about the trajectory of the U.S. economy in the third quarter.
The second quarter comes to an end on June 30. As of last week Wall Street was expecting year over year earnings growth of 60% for the second quarter and 23% year over year earnings growth for the third quarter. Expectations like that for earnings growth make it unlikely that many investors or traders will bail out before second quarter earnings season, which starts with JP Morgan Chase (JPM) reporting on before the market open on July 13. JPMorgan Chase is expected to report earnings of $3.07 a share. Which would be a modest 122% increase from the $1.38 reported for June quarter of 2020. And the bank reported an earnings surprise of 48% in the March quarter. See why investors and traders might want to stay on board for second quarter earnings reports?