The S&P 500 (SPY  ) was up by 0.70%, reaching new, all-time highs, following a very strong June jobs report. It seems to defy the skeptics who believed that the economy's momentum was slowing as employment figures in the spring were underwhelming. Currently, the economy is 7.1 million jobs short of its pre-pandemic levels, however, the jobs report provides hope that we are on pace to make up these losses.

Some other bright spots in the report were positive revisions to previous months, strength in hospitality and leisure jobs, and signs that higher wages are having a positive impact on luring people back to the jobs market. The unemployment rate did tick higher, but this was due to more people coming back to the workforce. Finally, the report was strong enough to signal that the recovery is on track but not strong enough that it would necessarily lead to an acceleration of the Federal Reserve's tapering or hiking timeline.

Inside the Numbers

The major headline for the jobs report was beating consensus expectations of 706,000 jobs by a healthy margin. However, a deeper look at the numbers reveals even more optimism. April and May's figures were revised higher by 9,000 and 24,000, respectively. U6 unemployment, which counts discouraged workers and part-time workers, fell sharply. Wage growth was also strong, rising 0.3% every month and 3.3% on an annual basis.

Many economists believe this type of figure is consistent with GDP growth above 10% which seems plausible for Q2. Of course, it's being helped by the relaxation of restrictions all over the country and life returning to normal.

In June, hospitality accounted for a large chunk of the job gains as it added 343,000 workers, including 194,000 in bars and restaurants. However, this sector remains short by 2.2 million jobs, so we should continue to see the bulk of job growth in this area. Education also accounted for an increase in 269,000 jobs. Some other contributors were in professional and business services, personal services, and manufacturing. One surprise was the 7,000 decline in construction jobs.

Outlook

The reaction from the stock market and bond market make it clear that this was a "Goldilocks" number in that it indicates the economy is growing but not growing so fast that a policy change would be required. Further, there's reason to expect that the labor market's recovery will continue and possibly accelerate with the expiration of benefits and the reopening of schools.

Of course, the economy is quite strong by other respects in terms of consumer spending, fiscal stimulus in the pipeline, the economy reopening, and the potential for an infrastructure bill being passed. Therefore, this report validates the bull market and recent strength in the market.