June NFP Results

Expectations:

• Headline non-farm payroll (NFP) print – +165k
• Unemployment rate +4.8%

Actual:

• Headline +287k
• Unemployment rate +4.9%
• Revisions​ -6k fewer jobs were added in April and May
• Average hourly earnings fall to +0.1% vs. +0.2% m/m – expected to climb as we approach full employment

U.S. employers ramped up hiring in June after a sluggish spring, signaling renewed momentum in the labor market that could quiet fears about a broader economic slowdown even as global market turbulence casts a shadow over the outlook.

Including June’s strong rebound, hiring in Q2 averaged +147k per month, down from +196k in Q1 and +229k in 2015.

The share of Americans with jobs or actively looking for work rose to +62.7% from +62.6% in May.

The average hourly earnings of private-sector employees climbed +2.6% in the year through June; it was last that high in December.

Next question – What’s the Fed going to do?

The wage data is a bit disappointing, but it continues to move in the right direction on a YoY basis. Expect some fixed income dealers to begin talking about putting a Fed rate hike back on the table for this year (look to September and December), but in reality it is still too early to tell. Fed-funds futures, currently show that investors see a +24% likelihood of a rate increase by the Fed’s December meeting, compared with +19% before this morning’s report.

The Fed is going to need to see another few months of solid data and continued calm in financial markets before moving forward. The impact of Brexit on the U.S. economy will begin to come into focus over the coming months.

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