In this morning’s data, the economy added 339,000 jobs in May, again more than expected and the previous month was revised higher. The Health Care and Social Assistance industry and Government jobs were relatively strong, while Manufacturing was relatively weak. The Unemployment Rate increased three-tenths to 3.7% and the Labor Force Participation Rate at 62.6% is the same as the previous month. Average Hourly Earnings increased 0.3% in May, as expected, and is 4.3% higher on an annual basis. In addition, Average Weekly Hours were 34.3, one-tenth lower than the previous month.
Overall, a mixed report with a strong increase in the headline jobs number coupled with an increase in the unemployment rate. However, the unemployment rate remains low by historical standards. While certain parts of the economy are challenged, including manufacturing, inflation remains elevated and average hourly earnings are still increasing. Given these data points, the Federal Reserve appears compelled to maintain tight monetary policy, as members debate the need to skip or continue with rate increases at the upcoming meeting. How well consumer spending, liquidity in the system, and company earnings hold up amidst these conditions will be key for markets in the months ahead.
Following the release of the jobs report, the yield on the U.S. 10-year treasury ticks higher and equity futures are also higher as we head into the market open.
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