Non-Farm Payrolls Miss Expectations, Markets Fall
On Friday morning, the Bureau of Labor Statistics reported that Non-Farm Payrolls grew only 80,000 in June. This reading was much lower than economists' upwardly revised consensus estimate of 100,000.
In addition, the Bureau revised Non-Farm Payrolls data for April and May and reported the unemployment rate. April's 77,000 reading was revised down to 68,000 and May's 69,000 reading was revised up to 77,000. The unemployment rate effectively stayed constant at 8.2 percent.
On a non-seasonally adjusted basis (excluding the sophisticated mathematics used by the Bureau of Labor Statistics), Non-Farm Payrolls grew 391,000, much slower than the 780,000 pace of job growth in May. Further, in a statement, the Bureau said, "the confidence interval for the monthly change in total nonfarm employment from the establishment survey is on the order of plus or minus 100,000." In other words, the Bureau said the actual number has a 90 percent probability of being in the range of -20,000 jobs to +180,000 jobs on a seasonally adjusted basis.
In worse news, the U-6 measure of unemployment, incorporating factors such as marginally attached and part-time workers, rose to 14.9 percent from 14.8 percent. The rise in this measure of unemployment without a rise in the employment rate reflects the fact that the labor force grew in June by about 150 thousand people.
As people enter the labor force and do not find jobs, they become unemployed and detract from job growth. Thus, these new entrants either found part-time jobs or remained marginally attached, increasing the U-6 rate.
The Non-Farm Payrolls data miss came days after strong employment data was released. The ADP private sector survey showed that the private sector added 176 thousand jobs in June. Also, the employment sub-index of the ISM Non-Manufacturing Index showed strong services employment. Lastly, initial jobless claims edged lower and job cuts were seen falling in the month.
Non-farm payrolls are subject to revisions. So, Friday's weaker than anticipated number not be the final June reading.
Friday's data was weak, but perhaps not weak enough for the Fed to consider another round of quantitative easing. The Fed only printed in both 2008/2009 and 2010 when Non-Farm Payrolls dipped below 50 thousand.
Futures fell rapidly on the news and settled at lower levels. Dow futures fell 75 points after being largely flat ahead of the data release. S&P 500 futures fell 8 points, after already being down around 2 points. Tech heavy NASDAQ futures were down around 11.25 points.
Gold initially rose on the data point, perhaps on hopes of further quantitative easing from the Fed. However the yellow metal then proceeded to retrace its gains and fell around 1.27 percent to $1,589.00 per ounce. Oil fell almost 3 percent to $84.77, as measured by the WTI benchmark. European stocks added to losses as the Spanish Ibex continued to fall, trading lower by 1.91 percent. The dollar index also spiked on the news.
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