The Economic Week Ahead: July 1-5

We know there will be fireworks on July 4th. The question is whether we should expect any blasts or just fizzling sounds during the week ahead related to the economy and the labor market. The holiday-shortened week will be jampacked with employment indicators. We aren't expecting any big surprises:

(1) Payroll employment. We expect that June's employment report (Fri) will show payrolls rose by 150,000 to 200,000, and that wage inflation continued to moderate. We've previously observed that payroll employment is highly correlated with S&P 500 forward earnings, which climbed to a record high in June (chart). That makes sense, since profitable companies tend to expand their payrolls. while unprofitable ones are forced to pare their payrolls.