U.S. nonfarm payrolls rise above expectations in June

Employment growth in the U.S. picked up in June. Payrolls in the nation rose above expectations. Non-farm payrolls rose a sound 222k in June, a rise from an upwardly revised 152k in May. Consensus expectations were for the payrolls to rise to 178k. Revisions to the previous two months’ of payrolls added 47k positions.

The improvement was widespread as gains were seen in the private sector employment and government payrolls. Private payrolls rose 187k, driven by widespread gains throughout the services sector that rose 162k. Hiring continues to be solid in healthcare & education, leisure & hospitality and business services. Goods hiring rebounded in the month on gains in construction and mining & logging. This marks the eight consecutive months of job growth for the mining sector off its October 2016 low. Manufacturing continues to be comparatively flat.

Meanwhile, government hiring rebounded, rising 35k, led by gains at the state and local level. Federal hiring was more modest that rose 4k. The U.S. jobless rate rose slightly to 4.4 percent in June as 361 workers entered the labor force, reversing most of May’s exodus. The labor participation rate was up 0.1 percentage points to 62.8 percent, consistent with its average over the last 12 months.

However, wages continued to disappoint. The report showed just 0.2 percent rise in average hourly earnings. On a year-on-year basis, wages rose 2.5 percent in June, a slight rebound from May’s 2.4 percent. Countering the disappointment slightly was a rise in hours worked to 34.5 in June.

Monthly job gains in the U.S. is expected to moderate in the months ahead, as tight labor markets make new hires tougher to find, noted TD Economics in a research report. However, as long as monthly hiring continues to be above the 80-120k level seen to absorb new entrants to the labor force, slack in the labor market will continue to diminish, stated TD Economics.

The Fed is well justified in gradually removing monetary stimulus as far as its full-employment mandate is concerned, said TD Economics. The recent weakness in inflation has led to some consternation by FOMC members.

“We expect the Fed to next focus on shrinking its balance sheet, likely in the fall, before taking rates another quarter point higher at the end of the year”, added TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at 39.5061. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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