Change in Nonfarm Payrolls for June was 206k,190k estimate. May payrolls were revised down to 218k from the 272k originally reported. Private Payrolls for June were 136k, falling short of the 160k estimate. May private payrolls also saw a downward revision, to 193k from 229k.
The Unemployment Rate ticked up to 4.1% (4.0% estimate and previous), its highest since November 2021.
While the payrolls data may not be great, the state of labor conditions in the U.S. is still good. Despite this, markets have chosen to focus on the downward revisions and see today’s data as giving the Fed a free hand to begin rate cuts as early as September. Fed Funds futures now imply a 74.5% chance of a 25 basis-point cut at the FOMC’s September 18th meeting and a 76.7% chance of a cut at the December 18th meeting. U.S. Treasury yields are lower in all tenors, with the 10-year yield now at 4.31%, down from 4.49% on July 1st.
The market getting ahead of itself, followed shortly by the Fed repeating its goal of ‘sustained inflation near the 2% target’ is now an all too familiar pattern. The chance of a September rate policy action is more likely 50/50 at best. Fed Chairman Powell will reiterate the Fed’s criteria for rate cuts during next week’s testimony to the Senate Banking and House Financial Services committees and bring the market’s enthusiasm back in line.
The dollar dropped following the jobs data leading to a 0.17% decline in the U.S. Dollar Index, now in its 4th consecutive daily loss. Today’s dollar spot returns: -0.54% vs. AUD, -0.51% vs. GBP & NZD, -0.46% vs. JPY, -0.45% vs. CHF, -0.40% vs. EUR, -0.37% vs. MXN and -0.07% vs. CAD.
Canadian Net Change in Employment for June was -1.4k, below the 25.0k estimate (even getting the direction wrong). And Canada’s Unemployment Rate increased to 6.4% from the previous 6.2%.
The U.K.’s Labour Party won Thursday’s general election in a landslide, ending 14 years of Conservative Party rule.
