Muted Market Reaction to Job Data Disappointment

The US employment data was disappointing. The short-term market had been leaning the wrong way. The recent data had fanned hopes that the labor market was accelerating, but today’s data suggest the pace of improvement has not changed.

 It is the sixth month that net new job creation was in excess of 200k, but private payrolls snapped that streak. The 198k increase in the private sector jobs was the lowest since January. 

The unemployment rate, both the narrow measure and the broader measure ticked up to 6.2% and 12.2% respectively. The participation rate increased to 62.9% from 62.8%. This is a bright spot of the report and reinforces the idea that the participation rate has bottomed (cyclical low was recorded last October at 62.8%.  

Among the most important elements of the report, average hourly earnings also disappointed. The June figures were revised to 1.9% from 2.0% and the July figure came in at 2.0%, while the consensus expected 2.2%. 

The implications for other July data is not unequivocal. Of note, the manufacturing added 28k jobs, and the June series was revised higher to 23k from 16k. This seemed to largely reflect the auto sector. Construction added 22k jobs, which is a, well, constructive development. 

The disappointment initially drove the dollar down across the board. It has found some traction in choppy trading. Bonds are little changed, with the 10-year at 2.55%. Stocks have pared some of their earlier losses, but the S&P is still called lower at the open.