June US job growth moderates, unemployment rate ticks up

Nonfarm payrolls increased by 206,000 jobs last month, the Labor Department’s Bureau of Labor Statistics said in its closely watched employment report on Friday. Data for May was revised sharply down to show 218,000 jobs added instead of the previously reported 272,000.

MARKET REACTION:

STOCKS: S&P 500 E-minis were mostly unchanged
BONDS: The yield on benchmark U.S. 10-year notes was down 3 basis points to 4.317%
FOREX: The dollar index fell 0.18% at 104.97

COMMENTS:

SCOTT WREN SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS, MO

“That was towards what the Fed wants to see. It was a favorable number that shows the economy is slowing down and wage growth was slowing a bit with unemployment ticking up. Wage growth was under 4%. The Fed wants to see it in the 3s.”

“It confirms a lot of the news we’ve seen lately that things are slowing down.”

KEITH LERNER, CO-CHIEF INVESTMENT OFFICER, TRUIST ADVISORY SERVICES, ATLANTA

“Our overall thesis for the economy right now is one that’s cooling but not weak. I think this report confirmed this but also I think it is the that 4% plus unemployment rate that will get the Fed’s attention and probably provides them flexibility likely to start reducing rates. We think it’s likely September.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“What we are looking at is a labor market that’s still producing jobs and the pickup in unemployment, which that might be considered on the negative side, and is probably due to weakness in the private sector.”

“The key here is the fact that wages are cooling down and that makes this a respectable report as far as the markets are concerned.”

“In terms of the Fed, we had last week a bunch of macro news which was not that great and indicated that the economy is accelerating to the downside a little bit faster than previously thought.”

“So, this report puts the Fed in a comfortable spot and by that I mean if this continues next month, with no increases in hourly wages, then I think we’ll see a rate cut in September and another one in December.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

“Manufacturing just can’t catch a break. Employment was flat and narrow with only 45.8% of manufacturing industries reporting job gains. Within construction, a bright-spot in this report, it was mostly non-residential specialty trade contractors that saw the gains. A worrying trend is the 18% increase over the last year of the number of people working part-time because that’s all they could find. It’s not all sunshine and happiness despite the nice headline numbers.”

ROBERT PAVLIK, SENIOR PORTFOLIO MANAGER, DAKOTA WEALTH, FAIRFIELD, CONNECTICUT.

“It’s a mixed jobs report. The numbers are all over the place. The top line looked better than expected. The prior month was revised much lower. Then if you look at private payrolls that came in lower than expected and was revised lower.”

“You get a mixed picture as to what’s going on in the jobs market. Earnings were a little down and the average work week was unchanged.”

“The market is trying to digest this and it’s a very quiet market a day after a holiday and tomorrow is the weekend. I don’t think that offices are very heavily staffed so you don’t get much movement.”

“It’s somewhat of a positive for those that are looking for a rate cut. The numbers are indicating that economy is slowing which feeds into the ability to cut rates.”

“Overall it speaks to a rate cut coming this year and that’s why you’re starting to see futures tick up a little higher and treasury yields tick lower.”

EMILY BOWERSOCK HILL, CEO, BOWERSOCK CAPITAL PARTNERS, LAWRENCE, KANSAS
“I would say it’s a relatively benign report. The market was generally expecting the job gains to be a little bit lower, but the number was lower than May’s report that really worried some people. If you’re the Fed, you’re saying – what happened in May is not quite as hot as we thought. The data isn’t bad enough to alarm markets, and not bad enough to worry the Fed.”
“The data this week could open the door for two (rate cuts), and I expect another surprisingly good inflation report through the end of the summer as shelter costs come down. So I wouldn’t be surprised with two cuts but our base case is still just one. The Fed has very clearly telegraphed they are expecting one cut.”

KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH

“Although (the data) came in hotter than expected, last month’s (data) was pretty aggressively reduced. Unemployment was higher than last month. These are all kind of indications that the economy is maybe not that hot right now. Combine this with last week’s PCE number, and I think we’re getting into a range that a lot of the members of the Fed can stand cutting, (with) the first rate cut sometime in September.”

PAUL ASHWORTH, CHIEF NORTH AMERICA ECONOMST AT CAPITAL ECONOMICS IN TORONTO

“Although the 206,000 gain in non-farm payrolls in June beat the consensus at 190,000, this was more broadly a disappointing report when we factor in the 111,000 downward revision to past months and the further rise in the unemployment rate to 4.1%, which puts us one step closer to triggering the Sahm rule on recessions.”

“That 206,000 gain was not nearly as good as it looks at first glance. Government employment increased by 70,000, with big gains in non-education state and local government that are hard to square with the anecdotal evidence of budget shortfalls forcing many states to rein in spending. Of the 136,00 increase in private payrolls, health care and social assistance accounted for 82,000 of those additional jobs. That suggests cyclical employment increased by only about 50,000, adding to the evidence of weakness in GDP growth. The massive 48,900 decline in temporary help employment is also a disconcerting sign.”

THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL LLC, NEW YORK

“The market was just bracing for if we were going to have a huge beat and that would have been terrible, because it would have pushed (interest rate cut expectations from) the Fed out to maybe 2025. “The fact that we came broadly in-line (on the payrolls number) and that the unemployment rate ticked up, signals to the market that if the Fed wants to cut (in September), they have enough cover to cut.”

“The other thing that we found for the last 12 months is that, even though you’ve had a lot of big beats, when you get a month or two months out, you find that they are dramatically revised down.”

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