By Rom Badilla, CFA, Bondsquawk
After a recent spate of recent disappointing data here and abroad, the markets received a reprieve today of some signs of hope that the economy may avert a slowdown. According to the Bureau of Labor Statistics Establishment Survey, the U.S. economy added 163,000 jobs in July which surprised forecasters as the median survey of economists was for only 100,000. The better-than-expected number helped offset the downward revision in the June print from an initial release of 80,000 to 64,000 workers.
Businesses added more people to the workforce than expected as Private Payrolls surpassed expectations as well. In July, Private Payrolls increased by 172,000 people versus surveys of 110,000 and after a move higher by 73,000 in the prior month which was revised downward by 11,000 from the initial estimate.
The Manufacturing Sector saw gains of 25,000 workers which was better than the 10,000 increase in June. In addition, the Private Services workforce increased by 148,000 people driven by improvements in Education and Health, Leisure and Hospitality, and Professional Business Services.
Average Hourly and Weekly Earnings each improved by 0.1% while the Average Weekly Hours was unchanged at 33.7.
In response, the yield on the 10-Year U.S. Treasury spiked after the report. The yield increased to 1.55% which is a change of almost 10 basis points from yesterday’s close.
Bond Investing – 10 Year U.S. Treasury Intrtaday Yield
While the Establishment Survey was generally better, the Household Survey painted a different picture. The Unemployment Rate increased by a tenth of a percent from the previous month to 8.3% which surprised expectations. The median survey of economists’ forecasts was at 8.2%.
Bond Investing – Unemployment Rate
In addition the Underemployment Rate or U6 measure which includes part-time workers who want to be full-time increased by the same amount to 15.0%.
Behind the numbers of the Household Survey, The Participation Rate declined slightly from 63.8% in June to 63.7% as the Civilian Labor Force declined. Household Employment fell by 195,000 people from the previous month.
Overall, the report was a net positive despite the slight uptick in the Unemployment Rate. This should give some evidence that a sharp slowdown is not in the cards for the U.S. and should alleviate concerns of the Federal Reserve which meets again in mid-September. A similar employment print for August that is scheduled for the first Friday in September, coupled with stable inflation expectations, could push any action of Quantitative Easing, if any that is, to the October meeting.