US Job Growth Tops Forecast

FLASH: President Trump, “The Economy Would Be ‘Rocket Ship’ If Fed Cut Rates”

US job growth rebounded strongly in June, with government payrolls surging, but persistent moderate wage gains and mounting evidence the economy was losing momentum could still encourage the Fed to cut interest rates this month.

The Labor Department’s closely watched employment report on Friday suggested May’s sharp slowdown in hiring was probably a fluke. Lack of concrete progress in resolving an acrimonious trade war between the United States and China means the bar could be very high for the FOMC not to lower rated at its 30-31 July policy meeting.

But the strong pace of job gains reduced the chances of a half percentage point rate cut at the end of the month. The Fed in June signaled it could ease monetary policy as early as this month citing low inflation and growing risks to the economy from an escalation in trade tensions between Washington, DC and Beijing.

“We think the Fed is still on track for a 25 basis points cut given trade uncertainty and the steady downtrend in business sentiment. An insurance cut by definition means getting ahead of a downturn, and waiting for employment to roll likely means being too late to deliver one.

Nonfarm payrolls increased by 224,000 jobs last month as government employment rose by the most in 10 months, and construction and manufacturing hiring regained speed. The economy created only 72,000 jobs in May.

Economists polled by Reuters had forecast payrolls rising 160,000 in June.

Job growth averaged 172,000 per month in 1-H of Y 2019. Hiring has cooled from an average of 223,000 jobs per month in Y 2018, in part as the economy runs out of workers.

The pace remains well above the roughly 100,000 needed to keep up with growth in the working age population

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