The solid July Employment Report keeps open the door for the Fed to hike the funds rate and begin balance sheet reduction in September. It shows above-trend job growth for the second month in a row as well as a dip in the Unemployment Rate. Wage inflation, however, remains constrained. The economy's strength should keep the stock market rally in place, even with the likelihood of Fed tightening in September. The hit to the long-end of the Treasury curve should be modest, as inflationary pressures remain muted.
The +209k m/m increase in July Payrolls, after +231k in June, exceeded the +184k monthly average so far this year. The July gain was widespread, occurring in the cyclical manufacturing and construction sectors as well as in services. Even department stores added employees this month. The +16k m/m in increase in manufacturing jobs also was noteworthy, as motor vehicle jobs rose despite plants shut down temporarily for an inventory correction.
Total Hours Worked rose 0.2% m/m in July. Their level is is 1.9% (saar) above the Q217 average, raising the odds of 2+% (q/q, saar) Q317 Real GDP Growth -- arguing against a slowdown in economic growth in Q317. Above-trend growth is also suggested by the dip in the Unemployment Rate to 4.3%, which put it below the 4.4% Q217 average.
The 0.3% m/m increase in Average Hourly Earnings was in line with the upward bias from the calendar. More importantly, the y/y was steady at 2.5% -- keeping it at the moderate pace seen in other labor cost measures and signaling no pickup in wage inflation.
No comments:
Post a Comment