ECO – Non-farm Payrolls Reflect Robust Labor Market

Top line non-farm payrolls, from the Establishment Survey, increased 288k in June beating expectations for 215k.  Household Survey data saw the unemployment rate fall to 6.1% from 6.3%, which is well within the Federal Reserve threshold to continue reducing their monthly purchases of treasury and mortgage backed securities.  In addition, the labor force participation rate held steady at 62.8% for the third straight month.  Overall private goods-producing and service-providing sectors saw robust growth.  The government sector, a long time detractor from job growth, added 26k jobs.  Furthermore, April and May non-farm payroll data were revised upward from 282k to 304k and 217k to 224k, respectively indicating stronger labor growth in the prior two months than was previously reported and bringing the 3 month average to a healthy 272k.  Digging deeper into this month’s report, details show that the average work week held steady 34.5 hours for the 4th straight month and average hourly earnings rose 2.0% YoY.  If there is any weakness in the report, it is the subdued wage growth pressure which may indicate a lack of broader inflationary pressure.  Overall, the jobs reports was very positive and we continue to view the improving labor market as a key driver of the direction of future Federal Reserve action.