Markets brace for US jobs report; Lagarde says eurozone recovery still fragile – business live

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Arguably the most important data release of the month for global investors, the US jobs report, is looming over markets today.

June’s Non-Farm Payroll is expected to show a jump of around 690,000 jobs last month (although forecasts vary), up from 559,000 in May, with the unemployment rate dipping to 5.7% from 5.8%.

Wages are forecast to have risen 0.4% in the month, and 3.7% over the last year, as the reopening of the economy has helped to boost pay.

Investors will scrutinise the data closely, for fresh clues on how soon the Federal Reserve will change its monetary policy and begin tapering its stimulus programme — slowing the flow of cheap money into the markets.

A strong jobs report would reinforce confidence in the strength of the US recovery… while a weak one might show that firms are struggling to hire in the scramble for staff.

Yesterday, the number of Americans filing new jobless claims hit a fresh pandemic low – highlighting the strength of the jobs market.

But as Jim Reid of Deutsche Bank points out, more than 7 million jobs are still missing due to Covid-19:

DB’s US economists are expecting a +700k gain for nonfarm payrolls, which in turn they expect to help knock the unemployment rate down a tenth to a post-pandemic low of 5.7%.

Of course, even with a +700k increase, that would still leave the total level of nonfarm payrolls -6.9m beneath its level in February 2020, so there’s still some way to travel before we get back to pre-Covid normality. But in advance of the report, we had a decent report on the weekly initial jobless claims, which fell to a post-pandemic low of 364k (vs. 388k expected) for the week through June 26.

Wall Street hit record highs this week … Ipek Ozkardeskaya, senior analyst at Swissquote, says traders are looking for a strong figure.

Given the steady decline in weekly unemployment claims, we could expect to see a strong figure, but whether it’s stronger than 700’000 is yet to be seen.

The market clearly needs a strong figure to hold on to its upbeat mood, as a surprise weakness in jobs figures wouldn’t get the Fed to do more, when inflation is hovering around a worryingly high 5% and it’s not even sure that it’s a peak. Also, another important thing here is the average earnings, which are expected to have risen to 3.7% in June – to cope with the inflationary pressures, from 2% printed a month earlier.

The fact that many people are now getting new jobs in an environment of rising inflation makes the wages growth even steeper. And of course, if an eventual fall in oil prices could temper inflation, the higher wages are here to stay.

Oil is also on the agenda, as Opec+ ministers will meet today to discuss whether to raise output. Yesterday’s meeting was delayed after the United Arab Emirates balked at a plan to add back 2 million barrels per day (bpd) in the second half of the year.

The standoff could lead oil-producing countries to refrain from increasing output at all, says Bloomberg, falling back on terms that call for production to remain steady until April next year.

Yesterday, Brent crude hit its highest level since October 2018, scaling $76 per barrel, on the prospect of supply remaining tight even as demand continues to improve.

But it’s currently a little lower, down 0.25% so far this session, at around $75.65, ahead of the meeting.

The agenda

• 10am BST: eurozone producer price inflation index
• 1.30pm: US unemployment report for June
• 3pm BST: US factory orders for May