No Fireworks From June Non-farm Payrolls Report
Today’s Spotlight Market
In addition to the Non-farm payrolls for June, the Labor department released the weekly data for initial jobless claims. This data is viewed by analysts as an indicator of the extent of corporate layoffs occurring. For the week ending June 27, jobless claims rose by 10,000 to a seasonally adjusted 281,000. The 4-week average of jobless claims rose by 1,000 to 274,750. Claims below 300,000 are considered a sign of a healthy labor market. ?
Fundamentals
Market participants were able to get an early jump on the long holiday weekend, as Thursday?s release of the June Non-farm Payrolls report was relatively in-line with economists? expectations. The Labor Department reported non-farm payrolls rose by 223,000 in June, which was a near bulls-eye from expectations of a 230,000 jobs increase. The unemployment rate fell to 5.3%, down 0.2% from the previous month. While the headline figures were decent, a dive into the details of the report shows some continued headwinds.
First, we look at the payroll revisions for the previous two months which were revised lower by a combined 60,000 jobs. Average hourly earnings were flat last month at $24.95, and the year over year gain of 2% shows that wage inflation is very moderate. More disconcerting was the 0.3% decline in the labor force participation rate to 62.6%, which is the lowest level in 38 years. This shows that the decline in the unemployment rate was not due to more workers finding jobs, but rather more potential workers leaving the labor force. In fact, the Labor Department reported about 432,000 workers left the labor force in June.
Thursday?s employment data is expected to do little to sway the Federal Reserve from raising interest rates sometime in 2015. There was some talk among traders that a very strong jobs report could motivate the Fed to begin to raise rates as early as this month, but it appears that the odds continue to favor a rate hike by September at the earliest, with a vocal contingent believing that the Fed will remain cautious and wait until early 2016 before taking action on interest rates.
Technical Notes? -? View Today’s Chart
Looking at the daily continuation chart for 10-year Note futures, we notice prices forming a consolidation pattern since the start of June, following a significant price break. Prices are now trading above the short-tem 20-day moving average, but remain well short of the more significant 200-day moving average that many traders consider to determine the longer-term trend of a market. The 14-day RSI has turned neutral, with a current reading of 48.67. The June 11th low of 124.14.5 is seen as support for the September futures, with resistance seen at 126-29.
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