Friday, July 8, 2016

"Economists React to the June Jobs Report: ‘Christmas in July’"

From Real Time Economics:

'The June employment report could bring Christmas in July to U.S. equity markets'
The U.S. labor market rebounded in June, as employers stepped up hiring. The economy added 287,000 jobs last month, reversing a big slowdown in May. The jobless rate climbed to 4.9%, mostly because the pool of workers expanded. Here’s how economists and analysts reacted to Friday’s report.

“Startling, but it does not fully reverse prior weakness…Excuse us while we sweep up the pieces of our payroll models from the floor. Nothing suggested a rebound on this scale was remotely likely, demonstrating yet again that there are no reliable month-to-month payroll indicators. Even stripping out the Verizon strike, the broad-based net 252,000 number is much stronger than advance indicators suggested. But three caveats: First, the margin of error is over 100,000, and this reading could be revised down substantially. Second the average for the second quarter is only 147,000, down from 196,000 in the first quarter and 229,000 in 2015. Finally, note these data pre-date the Brexit vote. We doubt that will make a big difference to aggregate payrolls, but it will hurt manufacturing exporters.”– Ian Shepherdson, Pantheon Macroeconomics

“While June’s data is much more positive than May’s, the massive swings only add to the level uncertainty going forward.  If the Fed policy hold is truly predicated on too-high variability of economic data points, today’s number, no matter how positive, actually makes that hold more powerful.  It’s statistical reality, if, of course, you take policymakers at their word.”–Guy Lebas, Janney Montgomery Scott

“A continuing encouragement in the report is wage gains rising 2.6% from a year ago. As the labor market tightens, employers are having to hike wages to attract skilled workers. This is especially true for small businesses. [An] NFIB survey shows that hiring is the most difficult issue facing small businesses. Wages are rising at a much faster rate at small businesses than at larger counterparts. According to the Atlanta Fed Wage Tracker, which keep employment composition constant, wages have gone up 3.4% from a year ago, much faster than the [Bureau of Labor Statistics] estimate.”– Sung Won Sohn, California State University Channel Islands

“The big June employment report has a lot of warts. May’s number was revised down, 203,000 more people lost jobs, African-American unemployment is still high and wages have barely moved. None of that will affect the housing market this year, but the job market’s stubborn refusal to heal makes it a lot harder for the economy to create future homebuyers.”–Nela Richardson, Redfin

The 147,000 three-month average is a fair representation what an economy at full employment looks like late in the U.S. business cycle. We anticipate that as the business cycle enters the final innings of the cyclical expansion that monthly job growth will slow towards 100,000, which represents the number necessary to stabilize the unemployment rate, which climbed to 4.9% in June due to an increase of 417,000 individuals that entered the workforce. The June U.S. employment report will not result in any meaningful change to the Fed’s rate policy.”–Joseph Brusuelas, RSM US LLP