Employment Growth Better than Expected

The economy added 132k (consensus 125k) new jobs in June. May's figure was revised substantially higher to +190k from +157k originally reported. April payrolls were also revised higher to +122k from 80k. Net over the prior two months 75k more new jobs were created than originally thought. The unemployment rate held steady at 4.5% in June as the labor force participation rate rose slightly to 66.1%. The aggregate hours index rose +.5% MoM.

Average hourly earnings rose +.3% MoM, as expected. Over the past year, average hourly earnings have risen 3.9% YoY. This compares with a 4% gain in May, which was a revision higher from +3.8% YoY gain originally reported for May. Average weekly hours were as expected at 33.9 hours, but the figure for May was revised lower to 33.8 hours from the 33.9 hours originally reported.

Manufacturing payrolls fell more than expected in June (-18k, consensus -11k) but were offset by a revision in the May figures to only a 7k loss versus -19k. Manufacturing hours jumped by .2 hours to 41.3 hours per week, an increase of +.5%MoM. Overtime rose to 4.3 hours from 4.2 hours.

As expected, service jobs continue to be the main growth category, expanding at +135k in June following a gain of 199k in May. Retail jobs though fell by 24k in June, and temporary jobs declined by -8k. Despite weakness in the housing market, construction employment rose 12k, after falling 2k in May. Government jobs saw the largest increase since last September, rising +40k. Education/health/leisure/hospitality jobs all saw healthy gains in June, but remain near their three month trend growth levels.

Interest rates rose in reaction to the increase in jobs, higher wages, longer workweeks, and the unemployment rate hovering near a six year low. The yield on the 10y Treasury has risen 5bp since last night's close.

Non-Manufacturing ISM Stronger Than Expected

In June, non-manufacturing ISM rose to 60.7 (consensus 58), an increase from the prior month's rebound to 59.7. This puts the non-manufacturing ISM at its highest level since April 2006. Non-manufacturing activity has now expanded for over 50 straight months.

All 14 business categories recorded growth in June, but the pace of growth is slower than in May, based on the fact that both new orders (56.9) decreased in May. Prices (65.5), though softer, are still at a high level, and suggests inflation remains a concern. Inventories fell a tremendous 8.5 points to 52.5. New export orders also showed a decline of -7 points to 59, indicating most of the strength was domestic.

Non-manufacturing ISM focuses on the service sector of the economy, which is the fastest growing area. This survey is based on responses to a survey of purchasing and supply executives about their businesses. Strength in services should support employment growth tomorrow as the service sector has been the major creator of new jobs recently. Employment held recent gains to remain relatively steady at 55.

Based on the comments, it appears that business is generally stable, and better than last month, but still depressed versus a year ago. The components don't seem to show the strength of the headline figure.