U.S. NFP Finally Beats Expectations With 287K Jobs; But The Report Was Still a Mixed Bag

The U.S. non-farm payroll finally showed strong headline numbers as there was an increase of 287K jobs in June – the highest level since October of last year 2010 and above market estimates: The ADP estimated a gain of 172K jobs and the market expect a rise of 175K. The growth in wages, however, remains steady at 2.6% as wages increased by 2 cents, month over month – slightly lower than expected. The main sectors that expanded were in leisure and hospitality, health care and social assistance, and financial activities. Employment also picked up in the information sector as workers returned from a strike. The rate of unemployment rose to 4.9%. The U.S. dollar moved in different directions; the same can be said for gold and silver. Let’s breakdown this report:  

Despite the modest gain in the headline unemployment rate, the U6 unemployment measurement, a broader measure of unemployment, edged down to 9.6%. In terms of revisions, there was a total downward revision of 6K for May and April combined.

us laborSource: BLS

In June, the rate of U.S. unemployment was 0.4 percent points below the rate recorded in June 2015.

The number of unemployed persons (7.783 million) increased by 347K in June compared to the previous month. But the civilian labor force also increased by 414K. So there was a gain in number of people participating in the labor force and in the number of unemployed. Therefore, the participation rate increased to 62.7%.

Finally, wages rose in June compared to May – the hourly earnings reached $25.61 per hour — a gain of 2 cent or 0.1%, month over month – but this was lower than expected (exp. were for 0.2% gain); wages grew at an annual rate of 2.6%, year on year – slightly faster pace as in the previous month.

Bottom line

The headline figure was much better than expected and that helped drive back up equities on Friday. But in the forex and bullion markets the reaction was a bit more complex and not so clear cut because this report, after looking beyond the headline figure, wasn’t so impressive. After all wages grew at a slower than expected pace, unemployment rate (U3) picked up, and there were modest downward revisions for previous months. At the same time participation rate and U6 improved. Did I say this report was a mixed bag? Overall, this report only shows that we will need a few more reports to get a better idea of how well the economy is actually doing.

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