Solid headline numbers, but some weakness below.
Nonfarm payrolls (NFP) increased by 147,000 in June, modestly higher than market expectations of around 120,000. Additionally, there were some small upward revisions to the prior two months. From the household survey, the number of people employed rebounded to a gain of 93,000 after a large drop in the prior month – but given the small size of this survey, these numbers are usually highly volatile, and one-month changes are not that useful. The U-3 unemployment rate edged lower to 4.1 percent.
Mostly good data on the top line, but of the total gain in nonfarm payrolls, about half came from government employment – with private employment up by only 74,000 for the month. While still positive, this isn’t very strong. Does it indicate that the economy is slowing sharply, with private jobs moving toward negative numbers? That is still too soon to know given monthly volatility in the survey results, but it is certainly something to keep an eye on. And the one-month jump in government employment (all from state and local, with federal down a tad) is certainly unsustainable.
How will the Federal Reserve react to the June employment data? The inflation data for June (to be released in coming weeks) will be key in the FOMC’s decision, but the crosscurrents in today’s jobs report should keep the Fed on the sidelines again at the late-July FOMC meeting. Total NFP gains of nearly 150,000 and a drop in the unemployment rate to 4.1 percent should be sufficient to keep the Fed’s wait-and-see policy in place until more data is in place before the September FOMC meeting.
David W. Berson, Ph.D., CBE
Chief Economist
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