Bank of America doesn’t have high expectations for Friday’s job report. The bank anticipates a 60,000 increase in nonfarm payrolls in July, below the 100,000 Dow Jones consensus estimate. “If that forecast is correct, the knee-jerk market response will probably be dovish,” U.S. economist Aditya Bhave said in a note Tuesday. “However, we encourage investors to pay more attention to private payroll growth and the u-rate [unemployment rate].” While government employment jumped in June , that appears to be a seasonal distortion, he noted. He assumes a 25,000 decline in total government payrolls in the Bureau of Labor Statistics data for July. The more important story is private payrolls, Bhave said. “We think private payrolls will accelerate from +74k in June to +85k in July,” he wrote. In addition, the unemployment rate will matter to the markets, he said. In general, a 4.1% rate or lower would be hawkish, while 4.3% or higher would show signs of increasing labor slack, Bhave pointed out. The consensus estimate is 4.2%, up from June’s 4.1% rate. “We think our forecast of a 4.2% print would show that labor supply and demand remain well balanced,” he said. “But the second decimal place might matter: markets could take a dovish signal if we’re close to rounding up to 4.3%.”
