All indications suggest the economic growth seen in May and July took a big hit in July amid a resurgence of Covid-19 cases. Payroll provider ADP had projected the addition of more than 1 million jobs in July, while in reality only 167,000 new positions were added. One positive note in their report was a significant revision to the June numbers, which now shows job growth over 4M compared to the 2.3M first reported.
The consensus for the non-farm payrolls report tomorrow is currently 2M new jobs with a range of 350K to 2.5M. However, with so much uncertainty in the air, a single estimate might not tell the whole story. Additionally, with such a wide consensus range, this report could have vastly different implications depending on the final number.
For example, if the economy adds only 350,000 new jobs in July, market chatter will likely be focused on the new stimulus package and expansion of unemployment benefits. However, if the non-farms show additions of 2.5M, investor focus would probably shift to economic strength and recovery.
Both of these conversations are already ongoing. The economy has recovered well, better than many expected, but unemployment remains in the tens of millions with an unemployment rate around 11%. It is also true that additional unemployment benefits have helped countless families impacted by the pandemic, but they will likely need additional assistance.
With coronavirus cases starting to plateau and even decline in some areas, there is hope August and September employment growth can return to the levels experienced in May and June, although likely not to the same extent as fewer openings exist.
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