You ‘ve got to remember that at this point in the Federal Reserve cycle good is bad and bad is good.
So, by itself the good news in the June jobs report this morning would be counted as bad news. The economy added 213,000 jobs in June, well above the 195,000 projected by economists surveyed by Briefing.com. The May jobs total was revised upward to 244,000 from 223,000 as well. A big jobs number like that could strike the Fed as a signal that the economy is running too hot, that wage inflation is about to pop, and that it’s time to more aggressively raise interest rates to slow the economy a bit.
But…
…the unemployment rate edged upwards to 4.0% from 3.8% in May as workforce participation climbed to 62.9% in June from 62.7% in May. The strong economy drew more workers from the sidelines.
… and average hourly earnings rose by just 0.2% in June against a 0.3% increase in May (and economist expectations of a 0.3% increase in June.)
Those below the headline numbers say to the Fed, Hey, hold your horses. There’s no sign of runaway wage inflation and maybe the labor market isn’t as tightly stretched as some Fed economists think. That last point is huge and hugely contentious. The unemployment rate is near recent historic lows but labor force participation is too. If a strong economy could still encourage more workers from the sidelines and back into the workforce, there’s more slack in the labor market than the Fed fears. Of course, since no one really knows why labor force participation rates are so low, it’s very hard to say how many workers would re-enter the workforce and under what circumstances.
The financial markets, anyway, saw the bad news as good enough to push up the Standard & Poor’s 500 stock index by 0.85% at the close today and the Dow Jones Industrial Average by 0.41%. Technology stocks were particularly strong with the Technology Select Sector SPDR ETF (XLK) climbing 1.17%. Energy shares helped the indexes as well with the Energy Select Sector SPDR ETF (XLE) closing up 0.61%.
