Morning from Europe!

Today, it’s all about the NFP as the market continues to debate whether the US is in a recession or not. There is significant volatility in the consensus estimates, with no inputs above 240k and a few very bearish forecasts around 140k.

The top-ranked forecasters are predicting around 190-200k, but judging from recent June surprises, we argue that the risk/reward is still favorable for betting on the upside of consensus numbers. Since 2016, the June report has consistently surprised to the upside every single year, which is a notable pattern now lasting almost ten years.

Moreover, it seems the consensus forecast is influenced by the recent series of soft key figures from the US economy over the past 1-2 months. This is something we typically see ahead of a mean reversal in the economic surprise index, indicating that economists may be becoming too bearish.

Chart 1a: Non-farm consensus survey