The US employment report for June exceeded any possible expectations. Payroll employment increased by 213K against expected 195K, moreover, the growth in the previous month was revised from 223 to 244K. It is not necessary to worry about unemployment rate growth from 3.8% to 4.0%, as it occurred along with the growth of the participation rate from 62.7% to 62.9%. This means an increase in the amount of economically active population who have returned to labour force and intend to seek job.
Also, investors should note a very strong increase by 36K in manufacturing industries. This is the most considerable increase since August 2017, but at that time a high rate was just a leap after several months of failure.
Perhaps the only weak point of the report is the dynamics of hourly earnings. In June it increased by 0.2%, instead of expected and previous values which equalled 0.3%. Once again, economists are forced to shift the moment when the tight labor market will cause wage growth and inflation acceleration.
At the time of writing, market participants pay most attention to earnings. Soft data somewhat undermines the Fed’s position on the way to tightening monetary policy. Slower wages growth revives speculation that it will not be easy for the Fed to raise actively the rates in subsequent quarters, if it will not face visible inflation threat. The US dollar lost 0.4% in the response to employment data publication, as a EURUSD pair Increased by 1.1740, the highest level for the last three weeks. The weakening of dollar and speculation about possible softness of the Fed helped S&P500 to grow from intraday lows.