The Bureau of Labor Statistics reported that the U.S. economy added 372,000 jobs in June which was better than analysts' consensus expectations of a net gain of 250,000 jobs. Stocks and bonds initially declined on the report, as it means there is no economic reason for the Federal Reserve to relent in terms of its hikes.
However, both stocks and bonds ended the day closer to unchanged as the market continues to grapple with a unique mix of factors. It also slightly increases the chances of a 'Goldilocks' outcome for the economy, where the Fed can hike enough to slow it down and kill inflationary pressures without pushing the economy into a recession.
The U3 unemployment rate remained unchanged from last month at 3.6%, while U6 unemployment, which includes discouraged workers and those working part-time who want to work full-time, fell to 6.7% from 7.1% in May.
For investors, the jobs report is another data point in a puzzling mix. We are likely in a technical recession with Q1 showing a 1.8% contraction with Q2 likely to show another contraction. Of course, this is inconsistent with the U.S. economy nearly adding 2 million jobs combined in the first half of the year.
In terms of wages, annual wage growth came in at 5.1%, better than expectations of 5%. For the month, wages were up 0.3%. There is some softness from 5.6% and 0.5% in March. Overall, the wage figure will not affect the Fed's thinking when it comes to hikes.
The biggest contributor to the job number was education and health services with 96,000 hires. Professional and business services contributed 74,000 positions. Other additions included leisure and hospitality, healthcare, transportation, and warehousing. Manufacturing added 29,000 jobs as well which was a surprise given weak data as of late.
Government jobs declined by 9,000 and have the biggest gap compared to its pre-coronavirus levels. Overall, the U.S. economy remains short of pre-coronavirus employment by 755,000.
While the economy's near-term outlook remains muddled and challenging, it's worth noting that the economy has proven to be much more resilient than expected 2 years ago. Further, it's impressive that employment continues to increase even with recent headwinds like the Fed tightening, inflation, Russia's invasion, etc.