U.S. non-farm payrolls data for June far exceeded expectations and was significantly higher than the previous value. The unemployment rate rose slightly from the previous value and was less than expected. After the release of the data, the U.S. federal funds rate futures implied a small increase in market expectations for the Federal Reserve to raise interest rates once in December 2022.
Data from the U.S. Department of Labor showed that U.S. nonfarm payrolls added jobs in June rose by 850,000, far exceeding market expectations of 720,000. May nonfarm payrolls added jobs from 559,000 to 583,000, and April nonfarm payrolls added jobs from 278,000 to 269,000, revised downward.
Although the June data was better than expected, the overall employment level in the U.S. is still below the level of the outbreak.
In terms of key data, the U.S. unemployment rate was 5.9% in June, less than the market’s expectation of 5.6% and essentially unchanged from the previous value of 5.8%. Average hourly earnings rose at an annual rate of 3.6%, compared to an expected rise of 3.6% and a previous rise of 2%. The labor force participation rate of 61.60% was unchanged from the previous value and 0.1 percentage point below the expected value.
The breakdown of industries, leisure and hospitality, public and private education, professional and business services, retail trade, and other services saw significant job gains.
The Fed will not face imminent pressure to raise interest rates
CNBC commented that job growth accelerated in June. As the U.S. enters summer and epidemic-related restrictions ease, Americans who have been restricted from going out for the past year will be closer to getting back to normal, with hiring activity accelerating. As the employment numbers continue to rise, economists expect GDP growth to approach 10% in the second quarter. With vaccinations continuing, the related employment rebound will continue.
Bloomberg analysis suggests that while the June nonfarm payrolls data was better than expected, the U.S. job market is far from a full recovery. Demand for labor remains strong as businesses struggle to keep pace with overall economic growth due to the removal of restrictions on business and social activity, mass vaccinations and trillions of dollars in federal relief. At the same time, limited labor supply continues to plague employers, and U.S. employment remains well below pre-epidemic levels.
In terms of market reaction, analysts see S&P futures rising slightly following the data release. Proof that investors are likely to interpret the data as positive information: the higher-than-expected pace of job growth suggests that the U.S. economy still has growth momentum. However, the rise in the unemployment rate suggests that the U.S. economy has not yet fully recovered. All other things being equal, the Fed will not face imminent pressure to raise interest rates.
After the release of the data, the dollar index briefly weakened nearly 30 points, and spot gold briefly advanced $15 to stand at $1790 per ounce, a one-week high. The three major U.S. stock index futures expanded, with Dow futures now up 0.25%, S&P 500 futures up 0.28%, and Nasdaq futures up 0.55%.
U.S. Treasury futures regained gains, the 10-year Treasury yield once fell to an intraday low of 1.422%.
After the release of the non-farm payrolls data, the U.S. federal funds rate futures implied a small increase in market expectations for the Federal Reserve to raise interest rates once in December 2022. The market expects the Fed to raise rates once at its September meeting in 2022 with a 63.0% probability, and if it does not raise rates in September, the probability of raising rates once in November is 73.6%, and if it does not raise rates in both September and July, the probability of raising rates once at the December meeting is 107.3%.