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Got Your Jobs Correction Right Here!

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Friday, July 8, 2016

The June Non-farm Payroll Report was released before the bell this morning, bringing 287K jobs to the market — well ahead of the 150-170K range expected by a plurality of analysts. This follows a downwardly revised, sickly 11K in the month of May, which sent heads scratching across the country (when the tally was 38K) and kept the Fed from raising interest rates last month.

This is the biggest jobs beat in a long time. Too bad it follows the worst monthly performance of the last several quarters.

The Unemployment Rate rose to 4.9%, a result of more than 400K Americans re-joining the workforce. The Participation Rate came in at 62.7%. The long-term unemployed remains above 200K, however, so there is certainly room to improve in the U.S. labor market.

But private sector jobs gains of 265K is nothing to sneeze at — and it’s far better than the ADP ((ADP - Free Report) ) private sector jobs number of 172K released yesterday. While the ADP number has stayed roughly consistent month over month, the Bureau of Labor Statistics (BLS) report has shown wild volatility from 11K to 287K in the course of a month.

Instead of trying to figure out why there’s such a disparity, let’s pull back our focus a moment and show a 3-month average new jobs gains figure of 147K. True, today’s impressive number does bump up this average somewhat, but this is still a less-than-stellar number overall.

In fact, the overall pace of new employment does happen to be slowing, and looks to continue on this trajectory (barring a series of 250K increases in jobs for the next few months, of course). This indicates the market is finally seeing labor constraints, and a slight rise in hourly wages also bears this out.

Breaking down the jobs numbers by sector:

Leisure & Hospitality +59K
Health & Social Services +58K
Information +44K (largely a result of returning Verizon [(VZ - Free Report) ] workers)
Professional/Business Services +38K
Retail Trade +30K

The stock market definitely likes these numbers: while futures were up slightly prior to the jobs report, they swung toward a much higher open upon its release. And with a 3-month average jobs number still below 150K, common wisdom currently banks on the side of no Fed re-think regarding raising interest rates in the near term. Happy Friday!

Mark Vickery
Senior Editor