a) Payrolls / Establishment survey - Payrolls were once again very robust at 213K vs. a consensus of 195K, and a net upward revision of 37K to May & April. In the detail, Services Payrolls (+149K) were hampered by a rather unsurprising drag from Retail (-21.6K) after a rise in May (+25.1K), but compensated for by another strong gain 36K rise in Manufacturing, solid gains in Construction and Transport, and continued strength seen in Professional/business (+50K). On balance, this was very much in line with the broad swathe of anecdotal reports of very solid labour demand.
b) Unemployment Rate / Household Report - A rather more mixed Household survey, with the rise in the Unemployment Rate to 4.0% vs. expected / May 3.8% accounted for above all, by a very large jump in the workforce (so-called discouraged workers clearly returning to the labour force), as well as a sharp 499K rise in Unemployment (perhaps a reactive correction to the run of recent falls). That rise also prompted an uptick in the key U-6 Underemployment Rate to 7.8%, though this remains well below the 8.0-8.2% range that prevailed in H2 2017, and at the start of 2018. Overall its implies that there is still a little bit more slack in the labour market than the headline rate suggests, with the Labour Force Participation Rate improving modestly to 62.9% from 62.7%, but below the 2017/2018 high of 63.0%.
c) Average Hourly Earnings / Weekly Hours - Average Hourly Earnings were fractionally below the forecast of 0.3%/2.8% at 0.2% m/m 2.7% y/y, though a closer look at the detail is necessary. This is in so far as Construction Earnings posted a surprising -0.7% m/m (4.3% y/y), offset by continued strength in Mining (i.e. energy) 0.7% m/m (7.3% y/y); Services earnings posted a solid 0.5% m/m (3.2% y/y), despite the rather surprising ongoing weakness in Transport (0.1% m/m 1.7% y/y). Average Weekly Hours as expected at 34.5, with a rebound in Manufacturing Hours (40.9 vs. 40.8), paced again by Mining which hit a new cyclical high of 46.5 vs. May's 46.2, which implies a solid rise in Manufacturing Output, as was signalled by the better than expected Manufacturing ISM earlier this week.
d) Market reaction - Not quite 'meh', but once again this was rather muted outside of short-lived spikes in the US 10-yr and USD Index, perhaps not unsurprising given the divergent pull of payrolls and wages, and the cloud of trade tensions, and perhaps a desire to square books up ahead of the weekend (as already seen in Asian equities non-reaction to the US/China tariff imposition), along with the added distraction of today's double header of World Cup quarter finals.
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Marc Ostwald
Global Strategist
ADM Investor Services International