Data Preview & Forecast
MUFG forecasts June 2026 nonfarm payroll (NFP) growth to be 112k, consistent with the median of 115k from Bloomberg contributors, and below the 3-month average growth of 188k.
The unemployment rate (U/R) is expected to rise slightly to 4.4% in June, above the 4.3% median estimate from Bloomberg contributors. The decline in job losses and reentrants in May is expected to reverse in June, supporting a 0.05% point increase in the unemployment rate (U/R). However, a decline in labor force participation can offset growth and keep the U/R at 4.3%.
As in prior months, education & health care is expected to be the primary driver of jobs growth, followed by relatively strong demand in leisure & hospitality and in construction. The unusually strong growth in local government in May (55k) is expected to normalize.
Market Thoughts
Base-case view: Given that markets have repriced rates higher in June (driven by the strong May NFP and the surprise hawkish FOMC meeting), along with a partial unwind of the quarter-end bullish support for USTs, we think a consensus figure of around 100-125k and our expectation of a slight uptick in the U/R would trigger a minor rally (1-3bps) ahead of the long weekend, led by the front-end.
Upside risk: To trigger a rates selloff or more than 5bps, there would need to be a major upside surprise in payrolls (closer to 200k or higher) along with an unchanged or falling unemployment rate (U/R).
Downside risk: Given that positioning and rates are already elevated, we think that there is more of an asymmetric profile in the rates market, where a major miss in the headline and higher U/R would result in move of 7-10bps via a steeper curve.
Please see the link for the full write-up with charts and scenarios…