U.S. NFP: Jobs Beat Expectations; But Wage Growth Remains Flat

The U.S. non-farm payroll report beat market estimates: A gain of 222K jobs vs an estimated growth of 175K (The ADP estimated a gain of 158K jobs) in June; but wages growth,  yet again, didn’t pick up and showed a gain of only 2.5% in annual terms. Unemployment rate edged up to 4.4% — this time modest gain was mostly due to a pickup in participation rate. This report could still be enough for the Fed to move forward and raise rates again later this year.

The U6 unemployment measurement, a broader measure of unemployment, also rose last month to 8.6%. In terms of revisions, there was a total upward revision of 47K for May and April combined.

In June, the rate of U.S. unemployment was 0.5 percent points below the rate recorded in June 2016.

The number of unemployed persons (6.977 million) rose by 116K in June compared to the previous month. But the civilian labor force also increased by 361K. And in total, the participation rate inched up to 62.8%. This suggests the rise in unemployed was mostly due to more people entering the workforce.

Finally, wages increased in June compared to May – the hourly earnings reached $26.25 per hour — a gain of only 4 cents or 0.2%, month over month – lower than expected; wages grew at an annual rate of 2.5%, year on year.

Bottom line

The labor market is still loose enough to allow such growth, albeit slower than in recent years, in jobs. But the lack of wage pressure suggests the Philips curve is flatter and the inflationary pressures may only occur once the rate of unemployment drops to even lower levels. But for now, this report isn’t likely to change the Fed’s opinion and refrain them keep removing monetary stimulus.

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