Event of the Week – Non-Farm Payrolls (USD, GMT 12:30) – A 360k May nonfarm payroll increase is anticipated, after gains of 428k in both April and March, and 714k in February. Payroll growth should slow gradually through 2022 with reduced growth in the economy. We assume a 45k factory jobs rise in May, after a 55k April increase. We expect the jobless rate to hold steady from 3.6% in March and April. Hours-worked are assumed to rise 0.3% after the 0.4% figure in April, while the workweek holds steady from 34.6 in March. Average hourly earnings are assumed to rise 0.4%, from 0.3% in March, while the y/y wage gain should dip to 5.4% from 5.5%. In the last expansion, we saw a 3.5% peak for y/y wage gains, in both February and July of 2019, before the pandemic-boost to an 8.0% peak in April of 2020, and the ensuing strength in wage gains has allowed continued robust y/y increases into 2022.
ISM Services PMI (USD, GMT 14:00) – The ISM Services PMI is expected to rise to 58.0 from 57.1 in April, versus an all-time high of 68.4 last November, an 11-year low of 41.8 in April of 2020, and an all-time low of 37.8 in November 2008. We’ve seen a broad six-month pull-back in most of the producer sentiment measures from remarkably firm November levels to readings that are still historically elevated. We saw a modest March-April updraft in sentiment from a recent February trough, but overall sentiment seems to be dropping back to February levels in May. Producers have benefited from higher prices despite rising input costs, and the need to rebuild inventories in 2022 after the stimulus-induced 2021 sales surge, but is being adversely impacted by rising rates and mounting recession fears.
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