US June jobs report fairly strong, despite dip in wages

Unemployment rose unexpectedly in June, but only because more Americans were tempted to come out and look for a job, a positive sign perhaps for those hoping to see signs of a so-called 'supply-side' boost to the economy from the White House's tax cuts.

Indeed, other aspects of the report appeared to indicate that the labour market was continuing to hum along nicely, albeit with a bit more slack remaining than in May, which was a good thing.

According to the Bureau of Labor Statistics, US non-farm payrolls grew by 213,000 last month, alongside combined upwards revisions to the prior two months of data of 37,000.

In parallel, the rate of unemployment did rise by two tenths of a percentage point to 4.0%, contrary to expectations for it to remain steady a 3.8%.

That was entirely due to a jump of 601,000 in the number of persons in the work force, as more people began looking for a job, whereas only 102,000 more were employed during the month, leaving those now classified as unemployed - but searching for work - up by 499,000 at 6.564m.

Nevertheless, the fact remained that the labour force participation rate improved from 62.7% for April to 62.9% in May.

Average weekly earnings growth did however fall a tad shy of forecasts for a month-on-month increase of 0.3%, rising instead by just two tenths, for a year-on-year rate of growth of 2.7%, versus an upwardly revised 2.8% in April (consensus: 2.8%).

The average number of weekly hours was steady in June at 34.5.

"Fed officials appear to be increasingly concerned about the recent escalation of trade tensions. But labour market conditions are continuing to strengthen regardless, with the average pace of monthly jobs growth now well over 200,000," said Andrew Hunter at Capital Economics.

"With GDP growth rebounding markedly in the second quarter and core inflation trending higher, that will keep pressure on the Fed to continue raising interest rates," Hunter added.

For Michael Gapen at Barclays Research, "At 200k jobs per month, the unemployment rate should still head lower over time, keeping the Fed on its normalisation path. That said, soft wage growth and a bump in the U3 unemployment rate do not send a signal that the Fed is behind the curve.

"There is little in this report, in our view, that suggests the Fed needs to go faster or slower. Our expectation remains for two additional hikes this year, in September and December, and market pricing is likely to be consistent with at least one more hike this year."

As of 1404 BST, the yield on the benchmark 10-year US Treasury note was off by two basis points to 2.81% and at its intra-day low.