With NFP (nonfarm payrolls) to be released tomorrow, traders are beginning to wonder whether job creation will bounce back in June or continue down the path of slower growth. Although the U.S. economy meets the Federal Reserve’s definition of full employment, significant imbalances remain.

The NFP in May 

Employers added 138,000 workers to payrolls in May, Labor Department data showed last month. That was well below the median estimate calling for 185,000. Unemployment fell to a new 16-year low of 4.3%, but came at the expense of workforce participation.

The percentage of working-age Americans employed or actively seeking employment slipped to 62.7% in May from 62.9% the previous month. Low workforce participation has dogged the recovery efforts for the better part of the decade, raising concerns about a fundamental shift in the labour market.

Average hourly earnings increased 0.2% in May, which translated into an annualized gain of 2.5% annually in May.

June NFP Expectations

June employment data are expected to solidify progress in the labour market, but will probably do little to alleviate broader concerns about the U.S. economy. U.S. gross domestic product (GDP) expanded just 1.4% annually in the first quarter, revised estimates showed.  Although a pickup is expected in Q2, the pace of expansion is likely to disappoint previous forecasts.

For June, analysts are expecting nonfarm payrolls to jump by 183,000. The unemployment rate is forecast to hold steady at 4.3% and average hourly earnings are expected to come in at 0.3% month-on-month.

Weekly data on jobless claims continue to show a robust labour market. The number of Americans filing for first-time unemployment benefits edged up 2,000 to a seasonally adjusted 244,000 in the week ended June 24, according to the most recent Labor Department release. It was the 121st consecutive week that claims held below 300,000, which is a key threshold for labour market health.

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