| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Nonfarm Payrolls - M/M | 189,000 | 150,000 to 237,000 | 206,000 | 272,000 | 218,000 |
| Unemployment Rate | 4.0% | 3.9% to 4.1% | 4.1% | 4.0% | |
| Private Payrolls - M/M | 160,000 | 130,000 to 195,000 | 136,000 | 229,000 | 193,000 |
| Manufacturing Payrolls - M/M | 10,000 | 5,000 to 10,000 | -8,000 | 8,000 | 0 |
| Participation Rate | 62.6% | 62.5% to 62.7% | 62.6% | 62.5% | |
| Average Hourly Earnings - M/M | 0.3% | 0.2% to 0.3% | 0.3% | 0.4% | |
| Average Hourly Earnings - Y/Y | 3.9% | 3.8% to 3.9% | 3.9% | 4.1% | |
| Average Workweek | 34.3hrs | 34.3hrs to 34.4hrs | 34.3hrs | 34.3hrs |
Highlights
Although the increase in nonfarm payrolls in June is above market expectations, a steep downward revision to the prior two months indicates that job gains are weaker than previously thought. In June, nonfarm payrolls are up 206,000 compared to the consensus of up 189,000 in the Econoday survey of forecasters. However, the net revision for the May and April is down 111,000. This puts the monthly average for nonfarm payrolls at 177,000 in the second quarter, down substantially from 267,000 in the first quarter. Today's report is likely to excite expectations that the FOMC will find economic conditions favorable to a rate cut sooner rather than later.
Moreover, the increase in private payrolls in June is 136,000 which is noticeably below the consensus for 160,000. Jobs at goods-producers rose 19,000 in June, mainly from construction with an increase of 27,000. Private service-producers added 117,000 new jobs with most of that in an 82,000 rise for private education and health services. Government jobs jumped 70,000 about 1/3 of all jobs added with substantial hiring of 26,000 and 39,000 at the state and local levels, respectively. Overall, jobs increases are soft and mixed across sectors. If decreases are not widespread, these are sufficient to make the picture one of decelerating hiring and a loosening job market.
Nonetheless, the pace of increases for average hourly earnings are little changed in June. The month-over-month rise is 0.3 percent, down somewhat from up 0.4 in May but consistent with a pace of modest rises. The same can be said for the year-over-year increase of 3.9 percent in June after 4.1 percent in May. Competitive pressures on compensation for employees have eased but are still present as businesses seek workers with the right skills and experience.
The unemployment rate is up a tenth to 4.1 percent in June, the highest since 4.1 percent in November 2021. This remains a relatively low rate of unemployment in the historical context, but it is a tick above the consensus of 4.0 percent and another indication that the labor market has cooled. The U-6 rate of unemployment the broadest measure of unemployment including those marginally attached to the workforce and discouraged workers is unchanged at 7.4 percent in June. The labor force participation rate is up a tenth to 62.6 percent in June. A one-month increase in the rate is not a trend and the current reading remains little changed from the underlying trend seen for over a year.
Moreover, the increase in private payrolls in June is 136,000 which is noticeably below the consensus for 160,000. Jobs at goods-producers rose 19,000 in June, mainly from construction with an increase of 27,000. Private service-producers added 117,000 new jobs with most of that in an 82,000 rise for private education and health services. Government jobs jumped 70,000 about 1/3 of all jobs added with substantial hiring of 26,000 and 39,000 at the state and local levels, respectively. Overall, jobs increases are soft and mixed across sectors. If decreases are not widespread, these are sufficient to make the picture one of decelerating hiring and a loosening job market.
Nonetheless, the pace of increases for average hourly earnings are little changed in June. The month-over-month rise is 0.3 percent, down somewhat from up 0.4 in May but consistent with a pace of modest rises. The same can be said for the year-over-year increase of 3.9 percent in June after 4.1 percent in May. Competitive pressures on compensation for employees have eased but are still present as businesses seek workers with the right skills and experience.
The unemployment rate is up a tenth to 4.1 percent in June, the highest since 4.1 percent in November 2021. This remains a relatively low rate of unemployment in the historical context, but it is a tick above the consensus of 4.0 percent and another indication that the labor market has cooled. The U-6 rate of unemployment the broadest measure of unemployment including those marginally attached to the workforce and discouraged workers is unchanged at 7.4 percent in June. The labor force participation rate is up a tenth to 62.6 percent in June. A one-month increase in the rate is not a trend and the current reading remains little changed from the underlying trend seen for over a year.
Market Consensus Before Announcement
A 189,000 rise is the call for nonfarm payroll growth in June versus a much higher-than-expected 272,000 rise in May. Average hourly earnings in June are expected to rise 0.3 percent on the month for a year-over-year rate of 3.9 percent; these would compare with May's rates of 0.4 percent on the month and 4.1 percent on the year, both of which were also higher than expected. June's unemployment rate is expected to hold unchanged at May's 4.0 percent.
Definition
The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.
The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.
Description
If ever there was an economic report that can move the markets, this is it! The anticipation on Wall Street each month is palpable, the reactions can be dramatic, and the information for investors is invaluable. By digging just a little deeper than the headline unemployment rate, investors can take more strategic control of their portfolio and even take advantage of unique investment opportunities that often arise in the days surrounding this report.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
The employment data give the most comprehensive report on how many people are looking for jobs, how many have them, what they're getting paid and how many hours they are working. These numbers are the best way to gauge the current state as well as the future direction of the economy. Nonfarm payrolls are categorized by sectors. This sector data can go a long way in helping investors determine in which economic sectors they intend to invest.
The employment statistics also provide insight on wage trends, and wage inflation is high on the list of opponents of easy monetary policy. Fed officials constantly monitor this data watching for even the smallest signs of potential inflationary pressures, even when economic conditions are soggy. If inflation is under control, it is easier for the Fed to maintain a more accommodative monetary policy. If inflation is a problem, the Fed is limited in providing economic stimulus.
By tracking the jobs data, investors can sense the degree of tightness in the job market. If wage inflation threatens, it's a good bet that interest rates will rise; bond and stock prices will fall. No doubt that the only investors in a good mood will be the ones who watched the employment report and adjusted their portfolios to anticipate these events. In contrast, when job growth is slow or negative, then interest rates are likely to decline - boosting up bond and stock prices in the process.
Importance
The employment situation is the primary monthly indicator of aggregate economic activity because it encompasses all major sectors of the economy. It is comprehensive and available early in the month. Many other economic indicators are dependent upon its information. It not only reveals information about the labor market, but about income and production as well. In short, it provides clues about other economic indicators reported for the month and plays a big role in influencing financial market psychology during the month. Additionally, the Fed has made 6.5 percent unemployment a threshold for considering changes in policy - both for quantitative easing and the fed funds rate. And the Fed has emphasized that it is overall labor market conditions that matter - not just a specific number.
Interpretation
The bond market will rally (fall) when the employment situation shows weakness (strength). The equity market often rallies with the bond market on weak data because low interest rates are good for stocks. But sometimes the two markets move in opposite directions. After all, a healthy labor market should be favorable for the stock market because it supports economic growth and corporate profits. At the same time, bond traders are more concerned about the potential for inflationary pressures.
The unemployment rate rises during cyclical downturns and falls during periods of rapid economic growth. A rising unemployment rate is associated with a weak or contracting economy and declining interest rates. Conversely, a decreasing unemployment rate is associated with an expanding economy and potentially rising interest rates. The fear is that wages will accelerate if the unemployment rate becomes too low and workers are hard to find.
Nonfarm payroll employment indicates the current level of economic activity. Increases in nonfarm payrolls translate into earnings that workers will spend on goods and services in the economy. The greater the increase in employment, the faster is the total economic growth. When the economy is in the mature phase of an expansion, rapid increases in employment cause fears of inflationary pressures if rapid demand for goods and services cannot be met by current production.
When the average workweek trends up, it supports production gains in the current period and portends additional employment increases. When the average workweek is in a declining mode, it probably is signaling a potential slowdown in employment growth-or even outright declines in employment in case of recession.
Gains in average hourly earnings represent wage pressures. It is worth noting that these figures aren't adjusted for overtime pay or shifts in the composition of the workforce, which affects wages on its own. Market participants believe that a rising trend in hourly earnings will lead to higher inflation. But if increased wages are matched by productivity gains, producers likely will not increase product prices with wages because their unit labor costs are stable.
