I think there’s enough bad news on jobs in the surprisingly strong June jobs numbers announced this morning so that the financial markets can argue that Goldilocks is still on the job.
The strength is strong enough to keep alive talk that the Federal Reserve will begin to taper off its $85 billion in monthly purchases of Treasuries and mortgage-backed securities in September.
But the weakness in the jobs numbers is weak enough to keep doubts alive about a September beginning to The Taper. The 10-year U.S. Treasury fell in price to move the yield up to 2.71%. That’s a jump in yield from 2.51% on Wednesday and the highest yield since August 2011. But that kind of move, while indicating that the bond market believes that the Fed will taper off its purchases in 2013, doesn’t amount to panic selling. Especially considering that this is a low volume trading day.
In June the economy added 195,000 jobs, according to the U.S. Department of Labor. That was well above the projection by economists surveyed by Briefing.com for 166,000 jobs. The Department of Labor also revised May’s job gains to 195,000 from a first read of 175,000.
Aggregate wages grew too—by 0.6%–as a result of a 0.4% increase in average hourly wages and a stable average workweek at 34.5 hours. That kind of increase in aggregate wages is good news for continued growth in consumer spending in the United States.
So where was the bad news? Once again in the kind of jobs being created by the economy. Although the labor force participation rate crept up to 63.5% in June from 63.4% for a gain of 177,000 workers, the number of workers employed in part time jobs grew by 322,000 in June. Since 160,000 of those new workers in the labor force in June found jobs that means at least 162,000 workers who worked full time in May saw their hours cut in June.
This weakness shows up in the full-employment numbers. While the official unemployment rate was stable at 7.6% in June (more workers in the work force balanced out more jobs), the full-unemployment rate, which counts among the unemployed people who have given up looking for work and people with part-time work who would prefer a full-time job, rose to a four-month high of 14.3% in June from 13.8% in May.
Right now, as of 1:46 p.m. New York time, the Standard & Poor’s 500 Stock Index has climbed to resistance at 1625–again.
If stocks can’t break above that level on a low volume day like today, it’s an indicator, in my opinion, that financial markets aren’t sold on the strength of the U.S. jobs market.
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