The U.S. Labor Department's July payrolls report will be one of the most closely watched economic prints this week. Consensus economists are looking for non-farm payrolls to have increased by 900,000 in July, according to Bloomberg data, marking the biggest monthly job gain since August 2020. In June, payrolls rose by 850,000. The unemployment rate is also expected to have improved further last month, dipping to 5.7% from May's 5.9%.The U.S. economy remains in a deep hole for employment, even over a year into the pandemic period in the country. The service sector has especially borne the brunt of the deficit. Leisure and hospitality payrolls have fallen by a net 2.4 million since March 2020, though these industries have seen the biggest monthly gains so far in 2021 as employers try to re-fill open positions.
Labor shortages in both the services and manufacturing sectors have weighed heavily on the pace of the overall economic recovery. Companies including manufacturing bellwether Caterpillar (CAT) have recently cited higher compensation costs and labor-related issues as a factor weighing on their businesses. And according to data from Bank of America last week, labor- and wage-related inflation references have been up by 107% year-over-year so far in second-quarter corporate earnings calls, further underscoring employers' moves to increase incentives to bring back workers.
Economists have attributed these labor scarcities to a host of factors, including the lingering impacts of enhanced unemployment benefits, fears over going back to work and becoming sick, and difficulties finding child care before schools reopen in person.
"Despite stronger employment growth, the labor force rose by only 151,000 last month, leaving it 3.4 million below its pre-pandemic level," Andrew Hunter, senior U.S. economist for Capital Economics, wrote in a note. "We suspect the shortages partly reflect longer-lasting factors, including a wave of early retirements, muted international migration and an emerging skills mismatch between job vacancies and the unemployed, which could all take years to unwind."
As of the survey period for the July payrolls report, about half of U.S. states had ended federal enhanced unemployment benefits early to try and incentivize workers to re-enter the labor market. At the national level, these augmented benefits are slated to expire in early September, suggesting more individuals might return to work after this date. However, renewed concerns over the Delta variant have also created more uncertainty for workers and employers, and could also pose a risk to the labor market in the fall.
The July employment report is also going to be a significant data point for market participants as they try to ascertain the timing of a monetary policy move by the Federal Reserve. Last week, the Federal Open Market Committee signaled in its July policy statement that discussions over tapering its crisis-era asset purchase program were continuing. However, Federal Reserve Chair Jerome Powell also noted during the post-FOMC meeting press conference that the economy still remained a ways off from meeting the central bank's goals, especially with the labor market still struggling to claw back its pandemic-era job losses.
"The decision of when to taper will largely be a function of the incoming labor market data. As Chair Powell stated there is extraordinary demand for workers but there might be a 'speed limit' on how quickly these jobs are filled," Bank of America economist Michelle Meyer wrote in a note. "This is because people are not necessarily returning to the jobs they had prior to the pandemic but are finding new employment; that search process takes time."
"This idea of a speed limit might lower the Fed's target for monthly job growth but we still believe the Fed would like to see an average of 750,000 to 1 million jobs a month to feel comfortable progressing toward tapering," she added.
Etsy and Square earnings
Two key beneficiaries of the pandemic-era stay-at-home trade are set to report earnings results this week, offering an updated look at how well some of 2020's best performers held up growth during the early phases of the reopening.
E-commerce platform Etsy (ETSY) is poised to report second-quarter earnings on Wednesday. Top-line growth trends and buyer and seller retention after a blowout 2020 are poised to be the key themes for this earnings report, especially as other, bigger players already reported slowing momentum.
Shares of Etsy slid nearly 8% on Friday, falling in sympathy with Amazon (AMZN). The e-commerce juggernaut posted quarterly results last week that missed Wall Street's estimates on sales, and it offered a revenue outlook for the current quarter that also came in light. The results appeared to vindicate investors' concerns that a wave of virus-era e-commerce spending would begin to wane as vaccinations took place and consumers returned to going out and spending on more services rather than goods.
These similar decelerating dynamics may also be at play for Etsy, though it has still picked up considerable business on both the buyer and seller sides of its platform over the course of the pandemic. Etsy's ongoing results will depend in large part on the company's ability to retain and add to these elevated user numbers, especially as the effects of government stimulus checks and pent-up demand fade.
For the second quarter, consensus analysts are expecting Etsy to deliver adjusted earnings of 69 cents per share on revenue of $525.5 million, according to Bloomberg data. On the top line, that would be good for revenue growth of 23% — a marked slowdown from the 141% sales growth posted for the first quarter of 2021. However, the deceleration would mostly reflect especially difficult comparisons from the height of the pandemic last year: In the comparable quarter last year, Etsy's revenue surged by 137% as consumers around the world went into lockdown.
Second-quarter gross merchandise sales, or the total value of merchandise sold on the platform, are expected to grow to $3.02 billion. This would represent growth of about 12.5% over last year, but nearly 180% compared to the same quarter of 2019.
Meanwhile, payments company Square (SQ) is also set to report results this week on Thursday. Like Etsy, Square was also a major winner of the pandemic-accelerated shift to digital platforms. The stock grew 253% in 2020.
So far this year, however, Square has underperformed the broader market, rising by a more muted 13.6%. That's come even as the company posted blowout first-quarter results for the start of 2021, with revenue surging 266%.
Wall Street analysts are expecting to see these growth rates come down, however, even as business on Square's key Cash App platform remains robust. Last week, peer payments company PayPal (PYPL) posted second-quarter sales and delivered a third-quarter revenue forecast that missed Wall Street's estimates, though some of this miss was due to company-specific factors related to eBay's migration away from the PayPal payments platform.
Second-quarter revenue for Square is expected to rise by a still-solid 165% in the second quarter before slowing to 66% in the third. Much of this expansion is expected to continue coming from Cash App, a payments platform that brought in $4.04 billion in revenue in the first quarter, or $529 million when excluding bitcoin-related revenues. The company's bitcoin-related revenues will also be closely watched for the second quarter, given a cryptocurrency price rout that began in May and that may have deterred some users from making crypto transactions on the platform.
Earnings Calendar
Monday: Diamondback Energy (FANG), Take-Two Interactive Software (TTWO), The Simon Property Group (SPG), ZoomInfo Technologies (ZI) after market close
Tuesday: Under Armour (UAA), Clorox (CLX), ConocoPhillips (COP), Nikola (NKLA), Discovery (DISCA), Warner Music Group (WMG), Eli Lilly (LLY), KKR & Co. (KKR), Marriott International (MAR), Ralph Lauren (RL), SolarWinds Corp. (SWI) before market open; Akamai (AKAM), Devon Energy Corp (DVN), Caesars Entertainment (CZR), Prudential Financial (PRU), Occidental Petroleum (OXY), Activision Blizzard (ATVI), Avis Budget Group (CAR), Live Nation Entertainment (LYV), Coursera (COUR), Lyft (LYFT), Match Group (MTCH), Amgen (AMGN) after market close
Wednesday: CVS Health Corp. (CVS), AmerisourceBergen Corp. (ABC), Marathon Petroleum Corp. (MRO), Apollo Global Management (APO), Vulcan Materials (VMC), The Kraft Heinz Co. (KHC), The New York Times Co. (NYT), Royal Caribbean Cruises (RCL), General Motors (GM) before market open; Booking Holdings (BKNG), Qorvo (QRVO), The Allstate Corp. (ALL), McKesson Corp. (MCK), MGM Resort International (MGM), Etsy (ETSY), Electronic Arts (EA), IAC Interactive Corp. (IAC), Lemonade Inc. (LMND), Roku (ROKU), Uber (UBER), Western Digital (WDC), Wynn Resorts (WYNN) after market close
Thursday: Cigna Corp. (CI), Wayfair (W), Regeneron Pharmaceuticals (REGN), ViacomCBS Inc. (VIAC), Plug Power (PLUG), Duke Energy Corp. (DUK), Datadog (DDOG), SeaWorld Entertainment (SEAS), Moderna (MRNA), Yeti Holdings (YETI), Kellogg (K) before market open; Square (SQ), Novavax (NVAX), Cloudflare Inc. (NET), TripAdvisor (TRIP), FireEye (FEYE), Vimeo Inc. (VMEO), Virgin Galactic Holdings (SPCE), Zillow Group (ZG), Shake Shack (SHAK), Dropbox Inc. (DBX), Beyond Meat (BYND), Expedia Group (EXPE), Stamps.com (STMP) after market close
Friday: AMC Entertainment (AMC), Dish Network Group (DISH), DraftKings (DKNG), Dominion Energy (D), Norwegian Cruise Line Holdings (NCLH), The Goodyear Tire & Rubber Co. (GT), Cinemark Holdings (CNK) before market open
Economic Calendar
Monday: Markit U.S. manufacturing PMI, July final (63.1 expected, 63.1 in prior print); Construction Spending month-on-month, July (0.4% expected, -0.3% in June); ISM Manufacturing, July (60.8 expected, 60.6 in June)
Tuesday: Factory orders, June (1.0% expected, 1.7% in May); Durable goods orders, June final (0.8% expected, 0.8% in prior print); Non-defense capital goods orders excluding aircraft, June final (0.5% in prior print); Non-defense capital shipments excluding aircraft, June final (0.6% in prior print)
Wednesday: MBA Mortgage Applications, week ended July 30 (5.7% during prior week); ADP employment change, July (650,000 expected, 692,000 in June); Markit U.S. Services PMI, July final (59.8 expected, 59.8 in prior print); ISM Services Index, July (60.5 expected, 60.1 in June)
Thursday: Challenger job cuts, year-over-year, July (-88.0% in June); Trade balance, June (-$74.0 billion expected, -$71.2 billion in May); Initial jobless claims, week ended July 31 (380,000 expected, 400,000 during prior week); Continuing claims, week ended July 24 (3.26 million expected, 3.269 million during prior week)
Friday: Change in non-farm payrolls, July (900,000 expected, 850,000 in June); Unemployment rate, July (5.7% expected, 5.9% in June); Average hourly earnings, month-on-month, July (0.3% expected, 0.3% in June); Average hourly earnings, year-on-year, July (3.9% expected, 3.6% in June); Labor force participation rate, July (61.7% expected, 61.6% in June); Wholesale trade inventories, month-on-month, June final (0.8% expected, 0.8% in prior print); Consumer credit, June ($22.000 billion expected, $35.281 billion in May_
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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