This week the U.S. financial market was focused on employment data. On Wednesday, ADP released its National Employment Report providing details on the private sector. The Bureau of Labor Statistics’ Employment Situation report followed on Thursday with comprehensive labor market detail including both the private sector and the public sector.
As a potential interest rate hike looms ahead, this data becomes even more important and even more closely scrutinized.
On Wednesday, ADP reported an increase of 237,000 jobs in June within the private sector. At 237,000, the June increase beat economists’ average consensus expectation of 220,000. In June the previous month’s private sector increase was also revised up from 201,000 to 203,000.
The ADP private sector breakdown for June showed 225,000 jobs added in services and 12,000 jobs added by goods-producing companies. By sector, professional business services posted the greatest increase, up 0.31% followed by the construction sector which increased 0.30%.
Thursday’s Bureau of Labor Statistics’ Employment Situation report for June showed an increase of 223,000 nonfarm payroll jobs added in the U.S. economy for the month. All 223,000 jobs were added in the private sector in June with zero jobs reported in the public sector. Wage growth was unchanged with the average hourly rate of earnings in the private sector at $24.95.
Overall, the report was slightly below expectations. Economists had called for an increase of 230,000 jobs for the month. The June report also stated downward revisions in April and May, lowering the previous three month average increase to 221,00 per month.
The unemployment rate, however, beat economists’ estimates, decreasing to 5.3% in June. Economists’ consensus estimate prior to the release of the report was for a decrease in the unemployment rate to 5.4%.
While slightly subdued, the month’s employment data appears to keep the Federal Open Market Committee on track for an interest rate increase near the end of the year. The FOMC projections call for an unemployment rate between 5.2% and 5.3% in 2015 with the rate forecasted to decrease to 4.9% to 5.1% in 2016.
Steady gains in hiring and the lower unemployment rate appear to remain within the FOMC’s expectations. However, underlying factors continue to teeter. The number of long-term unemployed individuals decreased in June and for the previous twelve months overall. Although, individuals working part-time for economic reasons was basically unchanged at 6.5 million and average hourly wages showed little sign of improvement. Additionally, the effects from the Greek debt crisis could further play into the mix, specifically if underlying labor market factors do not show stronger signs of strengthening.
For the shortened week, U.S. financial market indexes moved slightly higher. The Dow Jones Industrial Average gained 0.72% led by Nike (NKE, Financial) up 4.42%. The S&P 500 was up 0.90% led by the utilities sector up 1.66%.
