Wall Street is abuzz over the June jobs report due this Friday, July 5. The crucial report may provide some keen insight into the the Federal Reserve’s policy decision later in the month. Indeed, following the relatively strong May report, the June jobs data should provide some hint at what’s to come in terms of monetary policy. Will the stock market crash?
Well, maybe. Investors and economists alike have largely been waiting for signs of an economic slowdown this year, mostly to no avail.
If you recall, the U.S. economy added 272,000 jobs in May, notably above projections. However, the unemployment rate actually climbed to 4% last month, the highest reading since January 2022. Wages also climbed quite quickly in May, which paints an unclear picture of the inflation situation to come.
“Accelerating pay growth could be a sign of inflationary pressures ready to rebound if the Fed takes their foot off the brake,” said Comerica Bank Chief Economist Bill Adams. “On the other hand, higher unemployment could signal weaker wage growth ahead, softer consumer demand, and less pricing power for businesses, which would cool inflation.”
What Will the June Jobs Report Mean for a Stock Market Crash?
The major concern here is that the economy will reach a point where rising recession risks, especially high unemployment, will outweigh the merit of monetary policy that champions only low inflation.
Indeed, while the country has dodged recession so far, further deterioration in the June jobs report may put the possibility of an economic downturn back on the table.
According to RSM’s Real Economy Blog, the U.S. will add 190,000 jobs in June, down fairly substantially from May. Unemployment however will stay the same at 4%. RSM also forecasts 0.3% wage growth on the month, a rise of 3.9% from the same month last year.
That said, inflation will still be king heading into the June Fed meeting. Indeed, this time around both the Consumer Price Index (CPI) and Fed-preferred Personal Consumption Expenditure (PCE) inflation reports will release ahead of the July 30-31 policy meeting.
The results of the jobs and inflation readings will likely make clear what the Fed will do this month. That said, interest rate traders currently price in a more than 91% chance that the Fed opts to hold rates steady this month, per the CME FedWatch tool.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
