A worker works on a screed tower connection at the Calder Brothers facility in Taylors, South Carolina, USA on July 19, 2021.

Brandon Granger | Calder Brothers Corporation | Reuters

According to the Dow Jones consensus estimate, the economy is projected to add around 845,000 workers in July as the American workforce gradually recovers from its heavy pandemic job losses.

But the uncertainty of Covid – which is spreading again at a rapid pace – has become a wild card for the job market, as well as for the entire economy. The number of new infections in the US is increasing to 100,000 per day, faster than last summer, when there were no generally available vaccines.

Wall Street’s predictions for the July Employment Report, due to be released Friday at 8:30 a.m. ET, are sweeping. The Wilmington Trust economists, for example, expect only 350,000 payrolls, while the Jefferies economists forecast 1.2 million new jobs.

“The range is from 1.2 million to 350,000. That just says these numbers have very little confidence,” said Michael Schumacher, director of interest rate strategy at Wells Fargo.

Employment growth has not lived up to earlier expectations of economists, some of whom forecast several months of growth in excess of a million this spring and summer. Instead, employers are struggling with vacancies and the situation is not expected to improve significantly until schools reopen and extended unemployment benefits expire in September.

The fast-spreading delta variant of Covid may not have affected the July report. However, economists say that if individuals are afraid to move back into the economy, new restrictions are put in place, or schools should be closed again, it could slow the rate of economic growth and affect employment.

The employment data is also critical to the Fed’s decision on when to slow its bond purchases, the first step in rolling back its loose policy and a precursor to rate hikes. Fed chairman Jerome Powell said last week he would like some strong employment reports before the Fed begins slashing its $ 120 billion monthly government bond and mortgage purchases.

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“We won’t know much about the balance in the labor market until the job report comes out in October,” said Schumacher.

According to the Dow Jones, the unemployment rate is said to have fallen from 5.9% in June to 5.7%. Average hourly wages are expected to have increased 0.3% month-over-month or 3.9% year-over-year. 850,000 jobs were added in June.

“The reason I have such a high forecast for July is because we’ve lost additional unemployment benefits in 25 states and claims have fallen sharply in those states,” said Jefferies finance economist Aneta Markowska. She added that there is usually a large seasonal decline in July that may not show up this year.

More than 22.3 million Americans were laid off in March and April 2020 when the economy abruptly shut down. In June total employment was 7.13 million below the level of February 2020.

“I was looking for a pretty healthy number, around 850,000 to 900,000, and a drop in the unemployment rate to around 5.7%,” said Kathy Jones, chief fixed income strategist for Charles Schwab. “The main reason we expect a pretty large number is that we expect some of the education jobs to come back. July is a little early, but we’ll see some of those numbers. That could add about 400,000. The seasonal adjustment is likely to make that worse too. “

Jones said she expected the mindset to be strong for the next couple of months.

“We expected the July, August and September period between reopening, schools reopening … job restoration to be quite strong as a result of the American bailout. All of that should make for a pretty strong July, August, September series of numbers, “she said.” Of course the Delta variant is the wild card.

According to Johns Hopkins University, the US reports a seven-day average of nearly 94,000 new cases on Aug. 4, a 48% increase from a week.

Wilmington Trust chief economist Luke Tilley said his low forecast was based on signs of slower growth he is seeing in high-frequency data. “We believe the execution rate is around 500,000 right now. The last month seems a bit over cooked, ”said Tilley.

Other recently released data show a mixed picture for employment.

BMO bond strategist Ben Jeffery said the half-dozen actions he watches tend to be a strong number and the others suggest otherwise. For example, ADP’s monthly payroll report for June was weak with 330,000 jobs versus an expected 683,000. But employment in the ISM service sector rebounded from 49.3 to 53.8. Anything over 50 indicates expansion.

“That [nonfarm payrolls] was always one of the hardest numbers to predict before the pandemic, and you add up all the nuances of the current hiring landscape. That makes it even more difficult, “he said.

Jeffery said the government poll week for the July report, which covers July 12, may not reflect the impact of the Delta variant concerns. “Whatever the number, it is greatly constrained by the fact that concerns about the Delta option weren’t as high during survey week as they are now or during the August survey period,” he said.

Because of this, he doesn’t expect big moves in the bond market unless the report is closer to one end of the forecast range or the other.