NEW YORK (Reuters) – U.S. job growth accelerated in June as companies, desperate to boost production and services amid booming demand, raised wages and offered incentives to draw millions of reluctant unemployed Americans back into the labor force.
Non farm payrolls increased by 850,000 jobs last month after rising 583,000 in May, the Labor Department said in its closely watched employment report on Friday. The unemployment rate rose to 5.9% from 5.8% in May.
MARKET REACTION:
STOCKS: S&P e-mini futures slightly extended gains and were up 0.27%, pointing to a higher open on Wall Street
BONDS: The yield on the benchmark 10-year note wavered and were last a tad lower at 1.436%. Two-year Treasury yields fell to 0.242%
FOREX: The dollar index turned 0.16% lower
COMMENTS:
DARRELL CRONK, CIO, WELLS FARGO WEALTH & INVESTMENT MANAGEMENT, NEW YORK
āFor capital markets, equities and bonds, this was a goldilocks report. It was strong enough but not too strong which is exactly what they wanted to see. If you got too strong a report the market couldāve had a negative reaction saying that means the Fed canāt wait two years to raise interest rates. There wouldāve been concerns that pulls the Fed forward. This was perfect. There were enough jobs that youād want to see but not so much that it concerns people that the Fed may have to act sooner.ā
āParticipation looks strong. Its unchanged month over month but thereās good evidence people are returning.
āThe narrative there is weāre seeing exactly what we were expecting, the services piece turning back on as the economy opens up. Thatās great news. Thatās exactly what we want at this stage of the recovery.ā
āWages were strong … Itās starting itās build. I donāt think weāve seen the high water mark yet in wage inflation pressure.ā
āUp to this point its been largely industrials and goods sector thatās been pushing the economy forward. Services has been turned off as retail, restaurants, travel havenāt been where weāve wanted them to be. As that turns back on, that will put pressure on wages.ā
āWe still have upward pressure that lies before us in wages. Beyond the headline jobs number, thatās the first place my eyes go to, whatās happening in wages?ā
TOM DI GALOMA, MANAGING DIRECTOR, SEAPORT GLOBAL HOLDINGS, NEW YORK
āThe nonfarm payroll number beat fairly well, but the unemployment rate shot up a little bit, that has people baffled.ā
āThe (U.S. Treasury) market is kind of struggling to go to lower yields, because were already at somewhat lower levels before the data came out. The market popped but canāt seem to go lower than 1.42% right after the release (on yields on the 10-year note.)ā
āMost of the gains came from the restaurant industry and education. As educators came back to work in the fall youāll see a real drop in the unemployment rate. I think weāre geared toward a fairly decent reopening but most of it will take place in the fall.ā
VASSILI SEREBRIAKOV, FX STRATEGIST, UBS, NEW YORK
āThe FX market was gearing up for a stronger number all week and you saw that in the dollarās strength. I think the bar for a positive surprise was higher as a result. We initially reacted positively to the headline, which was stronger than expected. And then moved a little lower because of some of the weaker details of the report such as the higher unemployment rate and the higher bar for a positive surprise.ā
āOverall, weāre moving in the right direction. The U.S. labor market is strong. How quickly we can eliminate slack in the labor market remains to be seen. But our view at UBS is that there is more slack than what appears at first glance. We expect more people to join the labor force in the coming months and as a result, unemployment rate will fall slowly.ā
JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO
āIt was definitely a very encouraging number overall.ā
āThis definitely shows that the pace is very steady of opening things back up and that is what we want to see so that the wages arenāt too hot and some of the inflation fears get a little bit mitigated given the fact you look at the average hourly wage really isnāt up much both over month and over year. The fact we did have so many restaurant and bar jobs, even though we know those people are probably getting paid more than they were before all this, that is still a lower wage than construction, etc, which was flat once again this month.ā
JOSEPH LAVORGNA, AMERICAS CHIEF ECONOMIST, NATIXIS, NEW YORK
āBig headline, the jobs market is recovering. Thereās still a lot of slack, thereās just no wage pressure.
āThe labor market is looking pretty good, itās moving in the right direction. Thereās still a lot more improvement thatās needed but left to its own devices at this point, the labor market and the broader economy are going to be fine.
āI would also argue that at the margin the data we got maybe makes a little less likely youāre going to get fiscal stimulus because people will focus mostly on the headline and why does the government need to do more if the things are getting better and youāre generating substantial job gains?ā
PRIYA MISRA, HEAD OF GLOBAL RATES STRATEGY, TD SECURITIES, NEW YORK
āA better report should mean higher front-end rates (on U.S. Treasuries), but they didnāt last. I think the market is torn between whether to price in the market outlook or the Fed reaction.ā
āIf the data is better normally that should mean higher rates, but if the Fed is forced to exit faster that would slow down the economy.ā
āItās the interplay between the economic outlook and the Fed reaction function that is creating some weird dynamics.ā
STEVE RICK, CHIEF ECONOMIST, CUNA MUTUAL GROUP, MADISON, WISCONSIN (email)
āItās yet another hopeful sign that this jobs report exceeded expectations. With continued rapid vaccine rollout and largely successful reopening efforts occurring across the country, cautious optimism seems warranted. The road forward looks promising as we slowly make strides to return to the robust 3.5% unemployment rate and pre-pandemic labor market conditions.
āFurthermore, U.S. household net worth has increased by $25.6 trillion since March 31st, bringing the total to $136.9 trillion. While this may be great news for some, there is strong evidence that the increase in household net worth mainly helped individuals at the upper end as most of these gains came from the stock market and real estate holdings, both of which are held by majority well-off households that tend to be white. Without programs in place to help those who are not able to participate in the market upswings, these positive numbers are less meaningful.ā
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