There was a lot of important information on the U.S. economy released this week, but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics (BLS) out this morning. Indeed, total nonfarm employment in America rose by 213K payrolls in June, a larger increase than expected and the 93rd consecutive month of job growth in this country. There was also a net upward revision of 37K jobs to the prior two reports, which helped payrolls growth average +211K during the past three months. That is higher than the 2017 average (+181K) and comfortably above Federal Reserve officials’ estimates for what is needed to keep up with population gains.
As for joblessness, the official unemployment rate (U-3) jumped from 3.8 percent in May to 4.0 percent in June, the highest reading since March and the largest month-over-month increase in two years. Since weekly jobless claims did not spike in June the sudden uptick in the unemployment rate could be a fluke in the data or a side effect of more Americans reentering the labor market due to greater confidence in their employment prospects. The latter is supported by a 0.2 percentage point rise in the labor force participation rate last month, although subsequent reports are still needed for more certainty. With respect to wage growth, average hourly earnings rose by 0.2 percent in June and 2.7 percent over the past twelve months, both slightly below forecasts but arguably an indicator that the economic recovery in America still has room to run. Altogether this was another Goldilocks job report (not too hot, not too cold) that monetary policymakers will use to continue justifying their gradual pace of interest rate normalization. Current market pricing implies a 79.4 percent chance of the next hike occurring in September.
Sources: Econoday, U.S. DoL, Twitter, CME, FRBSLPost author: Charles Couch