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CIBC: Recent Payrolls Gains Could Have Been Overstated

US OUTLOOK/OPINION
  • CIBC see nonfarm payrolls rising a below consensus 180k in July after June's 372k as the outperformance in the labor market relative to GDP growth suggests the recent gains in payrolls may be overstated.
  • That would also remain consistent with jobless claims rising into the reference week in both NSA and SA terms plus the underperformance in the household survey.
  • The jobs gained in July could reflect further growth in the leisure and hospitality sector in particular, which more than accounts for the 524K deficit in payrolls relative to pre-pandemic levels, against a slowdown in interest-sensitive and goods-producing sectors that have seen demand wane.
  • U/E rate seen unchanged at 3.6% whilst AHE likely continued at a 0.3% M/M pace.
  • A cooling in hiring is a precursor for the Fed to slow the pace of rate hikes, and if sustained in August, that could portend a 50bps hike at the September FOMC.
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  • CIBC see nonfarm payrolls rising a below consensus 180k in July after June's 372k as the outperformance in the labor market relative to GDP growth suggests the recent gains in payrolls may be overstated.
  • That would also remain consistent with jobless claims rising into the reference week in both NSA and SA terms plus the underperformance in the household survey.
  • The jobs gained in July could reflect further growth in the leisure and hospitality sector in particular, which more than accounts for the 524K deficit in payrolls relative to pre-pandemic levels, against a slowdown in interest-sensitive and goods-producing sectors that have seen demand wane.
  • U/E rate seen unchanged at 3.6% whilst AHE likely continued at a 0.3% M/M pace.
  • A cooling in hiring is a precursor for the Fed to slow the pace of rate hikes, and if sustained in August, that could portend a 50bps hike at the September FOMC.