The latest US jobs report for June is fairly impressive says Kevin Lings

1. The US employment rate rose slightly in June to 4.4% from May’s 4.3% and is marginally worse than the market
expectations for the rate to remain unchanged. Non-farm payrolls rose by an impressive 222 000 jobs in June,
surpassing the expected gain of 177 000. Since the financial crisis ended, the US has created almost 17 million
jobs, and is now 7.97 million above the peak prior to the crisis.
The private sector has gained employment over the past 88 months at an average of 190 000 jobs a month
and is currently at a record high. This momentum is expected to naturally slow over the coming months as the
economy edges closer to full employment.
While this is good news, with the unemployment rate decreasing from a high of 10% in 2009, the participation
rate continues to remain extremely low on a trend basis, meaning that the low unemployment rate is somewhat
misleading given that the participation rate remains well below its historical average.
Also disappointing is the average hourly earnings for all employees on non-farm payrolls, which rose by a modest
4 cents to $26.25, while average hourly earnings have only risen by 2.5% year-on-year. Wage growth remains
extremely low by historical standards and is constrained by structural impediments thus not adding much
upward pressure to US inflation.
Overall, despite subdued wage growth and a structurally weak participation rate, the latest employment report
is fairly impressive. This will tend to encourage the Federal Reserve to continue to normalize monetary policy,
thus we still expect another rate hike this year, with the Fed already having hiked rates by 25bps in June 2017.
STANLIB is an authorised financial services provider
By: STANLIB Chief Economist, Kevin Lings
Impressive US jobs report in June