Goldman Sachs: The World Cup will add 40k nonfarm jobs.

The World Cup may provide additional support for U.S. June employment data, with Goldman Sachs estimating that the tournament will boost June non-farm payrolls by about 40,000, making the employment report to be released on Thursday stronger than market expectations.

According to CNBC on Thursday, economists surveyed by Dow Jones expect June non-farm payrolls to increase by 115,000, compared with the 172,000 increase in May. Goldman Sachs is more optimistic, forecasting total non-farm payrolls to increase by 140,000.

Goldman’s assessment is based on private data from Homebase, a small business payroll services company. The data shows that while the overall hiring pace in June slowed somewhat, employment performance in the World Cup host cities remained relatively steadier, and hiring related to hotels and leisure also strengthened significantly.

For the market, the key is not whether the World Cup changes the employment trend, but rather that it may lift the headline reading of the June data. Investors will focus on whether the short-term job gains brought by the event will mask the true extent to which the labor market is cooling.

The event boosts demand for specific cities and industries

Goldman Sachs believes the employment impact of the World Cup should mainly be concentrated in the leisure and hospitality industry, professional and business services, as well as trade and transportation. These industries are more directly linked to event-related consumption, foot traffic, and demand for services.

Homebase data provides support for Goldman’s view. The report shows that hiring overall continued to slow in June, but the year-over-year employment decline in 11 World Cup host cities was 1.2%, compared with a 3.5% decline in other cities.

This difference indicates that hiring demand at the event’s host locations may be getting a boost. At the same time, Homebase data shows that hotel industry hiring rose by 9.5%, which Goldman considers a potential source of employment growth related to the World Cup.

Goldman refers to this effect as a “boost to hiring that is at least mildly.” In other words, the World Cup has not reversed the overall slowdown in hiring, but it may be enough to change the marginal performance of the June non-farm payroll report. In addition, Goldman also cautions that the June employment data itself may have an initially high bias. The bank notes that in recent years, the initial June non-farm payroll readings have tended to be revised upward, but over the last four years, the initial June figures were ultimately revised downward.

Therefore, the focus of interpreting the June employment report will be to distinguish between two types of signals: one is the short-term increase in hiring in event-related industries and cities, and the other is the hiring momentum across broader economic sectors. Goldman’s forecast suggests that the World Cup may make the employment data look stronger, but the overall hiring pace is still slowing compared with May.

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