Job creation was weak in June, although the unemployment rate managed to improve.
The numbers.
- 57k jobs created (115k expected)
- May revised down to 129k, a hefty cut from the initial 172k print
- Unemployment rate: 4.2% (down from 4.3%)
- Average hourly earnings growth: 3.5% (YoY) as expected
- Participation rate: 61.5% (down 0.3 points and doing all the heavy lifting on that ‘improved’ jobless rate)
The implications.
- Heading into today, traders were leaning toward a Fed hike as soon as September. A print this soft, dressed up by a shrinking labour force, makes that bet a lot harder to hold.
- Fewer people looking for work isn’t the kind of tightness the Fed wants to see — it smells more like discouragement than strength.
- We’d expect hike odds to come in and the recent run-up in yields to give back some ground, though one report rarely settles the debate for a Fed still fixated on inflation.
- US yields are 1-4bps lower, reversing a portion of yesterday’s move
