Last month's reading of 280 jobs put to bed the fear of April's dismal 126k job print the beginning of something far more sinister. The past two readings have been well above the 3 month average and the linear weighted trend line continues to point higher.
Wage inflation is a hot topic for FED policy
However it is not all about the Nonfarm payroll reading, as it is the 'average hourly earnings' which provides clues of indirect inflation. Last month the y/y indicator was at 2.3%, its highest since August 2011. In an environment where the US continues to print jobs over 200k and see employment below 5.5%, then continued strength in the average earnings should help the USD retain recent strength and provide FED some comfort that the labour market continues to show improvements.
(If you look at the two bottom charts you'll see further evidence of improving labour conditions from a Regional FED.)
Will Jobs data be overshadowed by pending Greek referendum?
Quite possibly, yes. Whilst we are of course likely to see some directional moves I would not be too surprised if they are limited as investors will be cautious to over commit before the 3-day weekend, which also provides the referendum on Sunday. Therefore, if we are to see established moves from NFP, we are more likely to see them if wage hourly earnings is soft along with NFP below 200k. USDJPY shorts could make excellent shorts too, as traders are likely to buy JPY before the weekend as a 'safe haven hedge' against Greferendum.
Markets to consider trading
New data points to strong wage inflation
This week the regional Federal Reserve Bank included a new employment indicator which suggests wage growth has picked up significantly over the past twelve months. Whether policy makes pick up on this data set is another question but should at least give FED hawks relief that they are on the right track to raise rates sooner than later.
Nonfarm vs Greferendum
This month’s employment data has two distinct differences about it: Being on a Thursday due to US Independence day on Friday and; The potential for this weekends 'Greferendum' to dictate the market sentiment and limit the potential for sustained moves from NFP.