JPMorgan's Feroli on NFP: Modest Job Growth, Unemployment Seen at 4.3% - FJElite

Feroli expects July payrolls to rise by 75,000, slightly below the 80,000 consensus but above the previous 57,000 increase. The unemployment rate is forecast to rise to 4.3% from 4.2%.

Average hourly earnings are expected to increase 0.2% month-on-month and 3.5% year-on-year.

Options expiring August 7 imply roughly a 0.7% move. With yields and inflation still the key risks for equities, Friday’s NFP is expected to trade as a “good news is bad news” event: a strong payrolls print would reinforce higher-for-longer pricing, push yields higher and weigh on rate-sensitive stocks. An outsized upside surprise, such as payrolls above 200,000, would likely intensify that move.

On the other side, technical effects including the unwind of World Cup-related hiring and a rebound in labour force participation could produce a softer payroll number and a higher unemployment rate. A moderate miss would likely be welcomed by equities if it pulls yields lower and shifts policy expectations slightly more dovish.