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Look forward to July 1, 2019 week: Holiday week likely to feel sleepy even with Employment Situation on the calendar

The July 1 week is likely to feel sleepy in spite of the presence of some important data releases. Thursday is the Independence Day holiday, effectively making the July 4-7 period a four-day weekend interrupted only by the release of the June Employment Situation at 8:30 ET on Friday. In fact, many offices will be down to a skeleton staff for a full week at the start of summer vacation season. Congress will be recessed and appearances by Fed policymakers will be few and made abroad. That pares down interest to only essential numbers.

The June data on payrolls will be eagerly awaited to see if the drop to a mild 75,000 increase in May will return to something that looks more robust and which leaves average monthly job gains closer to the 174,000 for the first quarter or the average of 150,000 for the second quarter to-date. Anything north of the 100,000-mark would still keep payrolls rising more than enough to absorb new workers entering the labor force. There is little evidence elsewhere that businesses have voluntarily reduced hiring, although anecdotally payroll growth could be restrained by a lack of workers. In any case, with the unemployment rate running at 3.6% for April and May with only sporadic layoff activity, the health of the labor market in not expected to be brought into question.

The holiday means that some data will be reported earlier than usual. The Challenger report on layoff intentions for June will be released at 7:30 ET on Wednesday. Levels of layoff activity have remained more elevated in recent months, although a lot of that is due to the ongoing correction in the retail sector. Workers displaced by store closures are finding other jobs, some in warehousing and transportation associated with on-line shopping.

The ADP National Employment Report for June at 8:15 on Wednesday is not affected by the holiday timing. The plunge in growth in private payrolls to 27,000 in May is unlikely to see a repeat in the same sort of sluggishness in hiring at service providers and payroll reduction among goods producers.

Initial jobless claims for the week ended June 29 at 8:30 ET on Wednesday is a day sooner than normal to accommodate the federal holiday. Claims seem to be on a bit of an upswing of late, but some of that could be noise related to weather, the end of the school year, and another round of closures in the retail sector.

The other data that might disturb the week’s quiet mood is the ISM indexes for manufacturing and non-manufacturing on Monday and Wednesday at 10:00 ET, respectively.

District bank surveys for the service sector are generally less reliable guides to the national report. The June data is mixed with two signaling higher activity and two lower. However, all are showing at least modest expansion and the two that have the best correlation with the ISM Non-Manufacturing Index suggest that there could be an increase from the 56.9 reading of May. I wouldn’t look for one, but also for no appreciable weakening in overall activity.

Regional data from District Bank surveys of manufacturing tell a consistent story of soft conditions in June. Some of it is that activity was pushed forward to earlier this year to avoid negative impacts from another round of tariff increases. However, it is also that global growth is sluggish and the factory sector is seeing a spottier pattern of incoming orders and shipments, and with less backlog, orders are moving through the pipeline with fewer delays. Inventories are receiving attention to keep them from rising in the event of a downturn. Four of the five District Bank ISM equivalent indexes are signaling a decline in the ISM Manufacturing Index from the 52.1 in May. The one that is higher is so little that it is essentially unchanged.

Orders for all factory goods in May are expected to decline in part from sluggish orders for durables (previously down 1.2%) and from a lower dollar value for nondurables related to recent declines in petroleum and other energy prices. Since much of decreases in durables orders were related to Boeing’s lack of new bookings, it was welcome news that it had more success in inking letters of agreement for a large number of aircraft at the Paris Air Show – particularly the troubled 737 MAX aircraft.


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