The June US employment report showed the economy added 209,000 jobs, below expectations. Analysts at Wells Fargo point out that the report offered additional evidence that the labor market is slowly coming into better balance as job growth slows and labor supply steadily expands. They expect the Federal Reserve to raise interest rates at the July meeting.
Key quotes:
“Nonfarm payrolls have seemed to defy the gravity weighing down other gauges of the labor market over the past year. However, the June employment report suggests this dynamic has run its course. Nonfarm payrolls increased by 209K in June—a respectable gain in its own right—but below the Bloomberg consensus for the first time in 15 months. Revisions also pointed to recent job growth flying a little closer to Earth.”
“The surprisingly resilient labor market has helped to keep the U.S. economy expanding at a moderate pace despite continued fears about a recession. However, even amid more forthcoming labor supply and gradually cooling labor demand, the weight of the evidence still suggests that the labor market remains too tight to be consistent with 2% inflation. The directional progress towards a more balanced labor market is encouraging and helps explain why the FOMC has slowed the pace of its rate hikes, but today’s data point to another 25 bps rate hike at the upcoming FOMC meeting on July 25-26th.”
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