Investors should be rooting for a May jobs report that shows the labor market is holding up just fine as opposed to a big surprise in either direction, according to a JPMorgan trading desk note. The nonfarm payrolls report on Friday is expected to show growth of 125,000 jobs last month, according to economists surveyed by Dow Jones, which would represent a decrease from April’s gain of 177,000 jobs. A result that matches expectations would likely result in a modest gain for the S & P 500 , according to a note from the JPMorgan market intelligence team. However, a slight beat of between 140,000 and 170,000 jobs would be a “Goldilocks print” and likely spark a S & P 500 gain of 1.5% to 2%, the trading desk note said. That type of rally would close about half the 3.4% gap between where the index closed Thursday and its all-time high from February. .SPX YTD mountain The S & P 500 is about 3% below its record highs. But there could be too much good news, as a number above 170,000 might be tricky for the Federal Reserve and, by extension, the financial markets. “For example, a 170k print could be written off, to a certain extent, to hiring needs around the demand pull-forward or a seasonal blip,” the note said. “A 250k print would likely be received as an economic re-acceleration with no material impact from the trade war (at least on labor) forcing the bond market to reset yields higher, removing one or both of the rate cuts priced into the market.” On the other side of the ledger, the market could drop 2% to 3% if the number comes in below 100,000, the JPMorgan team estimated. “The second tail outcome would likely end the current bull run. Recessions are the typical reason why bull markets end and a sub-100k print would put the entire market on ‘recession watch,'” the note said. The nonfarm payrolls report is coming after several other data points that suggested the labor market has cooled off in recent weeks. Initial jobless claims for the week of May 31 came in at 247,000. Private payrolls rose by just 37,000 in May, according to ADP, the lowest reading in that survey in more than two years.
