Why everyone is hyping up the US jobs report

From Wall Street to Washington, everyone is waiting for the latest US jobs report.

What’s happening: The US Labor Department releases data for May on Friday. Economists polled by Refinitiv predict another 650,000 jobs were added to the economy. That would be up sharply from the 266,000 jobs added in April, a shock disappointment that raised questions about the strength of the US recovery and the state of the labor market.

Investors are worried their crystal balls will fail them once again. While the ADP employment report released earlier this week showed 978,000 private sector jobs were added in May, sharply exceeding the 650,000 analysts had expected, it’s not always seen as a reliable indicator.

“Payrolls probably rose strongly by pre-Covid standards, but we see some downside risk versus the consensus again this month,” TD Securities strategists said in a note to clients. Goldman Sachs said that uncertainty ahead of the report is “higher than usual.”

“Downside risk” may not seem like a big deal. But the jobs data is hugely important for investors and policymakers trying to game out the next phase of the economic recovery.

Jobs growth is watched closely by the Federal Reserve, which is trying to determine when to roll back unprecedented levels of support for the economy. What happened in May will set the stage for discussions at its meeting later in June.

Richard McGuire and Lyn Graham-Taylor of Rabobank note that if Friday’s jobs reading is as strong as the ADP number, it “would probably push taper talk to the top of the [Federal Reserve’s] agenda for this month’s meeting” — referring to when the Fed will ease up on massive purchases of government bonds, a key part of its relief efforts.

Data on wages will also be under the microscope as inflation remains a major concern for investors and central banks. Expectations that wage growth will remain muted in the coming months are a major reason that many traders aren’t hitting the panic button as prices for energy and food leap.

However, labor shortages in many industries, and announcements of wage hikes from companies like McDonald’s, could lead to “a sharp rise” in average hourly earnings compared to last year, according to Goldman Sachs.

The world is watching: McGuire and Graham-Taylor point out that the US data isn’t appearing in a vacuum, and will also affect discussions at the European Central Bank, which meets in Frankfurt next week.

AMC defends its stock sale on YouTube

AMC Entertainment’s wild week isn’t over yet.

See here: After rallying 118% on Tuesday and Wednesday, shares plunged 18% on Thursday after the movie theater chain’s decision sell more stock slammed the brakes on its eye-popping rally. Its stock is down another 5% in premarket trading Friday.

Looking to capitalize on its popularity online and growing base of everyday investors, AMC said Thursday morning that it would sell 11.55 million shares to eager backers. It completed the offering the same day, raising more than $587 million.

But the company acknowledged that bizarre market dynamics were at play, and warned investors that they should be prepared to lose all their money.

“Recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business,” AMC said.

Sign of the times: In a YouTube interview with Trey’s Trades, an account with 287,000 subscribers, CEO Adam Aron defended the share sale.

“[It] makes AMC a much stronger company, much easier for us to grow going forward, and I think that’s in the best interest of our shareholders,” Aron said.

AMC certainly has plenty of work to do. Though the reopening of theaters is expected to help its business, it faces lots of uncertainty about how quickly patrons will return. Between April 2020 and January 2021, the company was within months or weeks of running out cash five different times.

My thought bubble: There’s a lot to unpack here, but I am so intrigued by the trend of executives, who normally appear on fusty calls with Wall Street analysts, speaking directly to armies of online investors. If you want to read more, I’d recommend this piece published by the New York Times in April.

US-China frictions are still playing out on Wall Street

President Joe Biden’s decision to expand a Trump-era ban on American investment in dozens of Chinese firms is a reminder that Wall Street can’t ignore ongoing tensions between Washington and Beijing.

The latest: Biden signed an executive order Thursday that prohibits Americans from owning or trading any securities tied to 59 companies, citing the threat of Chinese surveillance technology.

The original order, signed by former President Donald Trump in November, applied to 31 Chinese companies that the administration said “enable the development and modernization” of China’s military and “directly threaten” US security.

The Biden announcement largely continues the campaign his predecessor started against Chinese tech and other businesses, my CNN Business colleague Jill Disis reports.

Many companies that were on Trump’s list — including smartphone maker Huawei and video surveillance equipment producer Hikvision — remain on this one. Some of the country’s biggest telecom companies, including China Mobile and China Unicom, are also still banned. China condemned the move at a press briefing Friday, saying that the United States has “unscrupulously suppressed and restricted Chinese companies.”

Big picture: The new order “moves the world a step closer to strategic decoupling in the global financial sector,” said Alex Capri, a research fellow at Hinrich Foundation and a visiting senior fellow at National University of Singapore. He added that it “underscores the difficulty that American financial firms are going to have in the future, trying to sort out which of their investments have ties back to the Chinese state.”

Up next

The US jobs report for May posts at 8:30 a.m. ET, along with the unemployment rate and data on hourly earnings.

Also today: Federal Reserve Chair Jerome Powell and European Central Bank President Christine Lagarde speak at the virtual Green Swan conference on climate and finance.

Coming up: US Treasury Secretary Janet Yellen heads to a meeting of Group of Seven finance ministers in London on Friday and Saturday looking to build support for a historic overhaul of global tax rules.