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Real Time Insight

Traders got what seemed like the perfect set of numbers today.   

The Bureau of Labor Statistics said that the U.S. created 175,000 jobs in May, just slightly better than the 168,000 that many economists were expecting.  Despite the weakness in ADP and other economic readings, the beat was another sign that the economy continues to grow at a temperate pace despite higher taxes, federal sequester cuts and a weak global economic backdrop.

Average hourly wages barely rose, up 1 cent to $23.89 while the average workweek was unchanged at 34.5 hours.

While the top line beat should have spooked those worried about a Fed exit, the unemployment rate actually rose from 7.6% from 7.5%, as 420,000 unemployed people joined the labor force in search of work.

This was indicated by a rise in the civilian participation rate to 63.4%, which has been an uncommon occurrence (the participation rate has been on the decline for a long time).

There were several revisions that essentially canceled each other out; the April employment reading was lowered to 149,000 from 165,000, while March's figure was revised up to 142,000 from 138,000.

The largest increase in hiring in May occurred in the fields of professional services (57,000), bars and restaurants (38,000) and retail (28,000). The manufacturing sector cut 8,000 jobs and government employment fell slightly again.

Overall the report struck me as mostly flat too moderately positive, but with a surprise tick up in the unemployment rate appeasing those looking to remain on the Fed’s lifeline.  The futures have reflected this positivity and are higher after the report.

Does this change your QE tapering timeframe?

Even though the unemployment rate ticked up, I think the Fed will view this report as “on course” and will begin to at least introduce language, if not begin tapering in the September meeting.   My prediction therefore remain relatively unchanged since before the report

When do you think the Fed will begin to taper and has this report helped or hurt that prediction?

1.       QE Tapering Begins in September

2.       QE Tapering Begins in this year but is dependent on more data

3.       QE Tapering won’t begin until early next year

4.       QE Tapering won’t begin until late next year

5.       Other (explain)

**Tell us if this report changed your outlook

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