U.S. Non-Farm Payrolls Beat Expectations – Again
The much-awaited NFP data out of the United States confirmed the previous month’s upbeat. 4.8 million people came back to work in June, exceeding expectations of 3.037 million.
As it is accustomed, jobs day is not only about the jobs created, but also about other jobs data coming to complement the main release. The Unemployment Rate, for instance, declined to 11.1% from 13.3% in the previous month, and on expectations of 12.4%.
Employment Situation Summary for June 2020
The first Friday of every month (this week being an exception due to the 4th of July holiday) brings the Employment Situation Summary released by the U.S. Bureau of Labor Statistics. It is a comprehensive analysis of the U.S. labor market, bringing to attention not only the NFP figure, but also other data like the Average Hourly Earnings (AHE), the number of discouraged workers, the labor rate participation, and so on. In other words, traders wanting to know exactly what the job release shows, should read the Employment Situation Summary every month.
A close analysis of this report usually reveals data beyond the headline number. On a positive NFP headline, some details may call for caution. Such is the case for yesterday’s report.
The labor participation rate in June increased to 61.5% or by 0.7% – a positive development, but still below the February level (i.e., before the pandemic stroke). Moreover, the number of persons not in the labor force but do want a job remains elevated – 3.2 million higher than in February.
Perhaps the most important data from the report is the number of permanent job losers – it reached 2.9 million in June, an increase by over half a million in over a month. These are the jobs most difficult to replace moving forward, as an economy needs a lot of time to do so.
As expected, the AHE fell 1.2%, more than the estimated 0.8%. One again, it puts pressure on inflation expectations, confirming the Fed’s message that it is willing to keep monetary policy accommodative for many years to come.
To sum up, yesterday’s NFP headline was positive, but the overall report shows a mixed picture. It is not clear yet how long it will take for the temporary laid off people to come back to the workforce, nor how long the pandemic will take.
What is clear is that the number of permanent job losers continued to increase – until this stops or reverses, any positive NFP headline should be taken with a grain of salt.