After May’s strikingly weak NFP print (38k), our economists expect a moderate rebound in June (130k). June’s employment report comes on the heels of the weakest NFP print since September 2010. The May report brought the three-month average to 116k (128k strike-adjusted) from 181k and was a large factor contributing to the Fed’s decision to leave rates unchanged at the June FOMC meeting.
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The outcome of the June payrolls report will be critical in that it will either confirm or challenge the recent deceleration in hiring. Our forecast of a moderate bounce-back in June payrolls (130k) would confirm the recent downward trend in hiring but leave its implications for the economy unclear. Even in the face of a strong print, the Fed would likely need to see evidence of a sustained improvement before pushing forward with normalization. We think June payrolls will keep uncertainty about the domestic outlook high and the Fed appropriately dovish.
This will not be a catalyst for USD rebound especially for USDJPY which has the closest link between the US economic cycle and the USD.