Non-Farm Payrolls Surge 287K, Unemployment Rate Rises To 4.9%

May was indeed an odd outlier in what is otherwise a still favorable trend for the labor market. June nonfarm payrolls surged a much stronger-than-expected 287,000 vs a downward revised and recovery low increase of only 11,000 in May. June's strength is led by a 38,000 gain for professional & business services, a closely watch area that is especially sensitive to changes in labor demand. Telecommunications, which fell 32,000 in May during the Verizon strike, rose 28,000 in a positive reversal for June. Manufacturing shows a rare gain and a sizable one at 14,000. Other industries posting gains include retail, government and also finance.

The unemployment rate rose 2 tenths to 4.9 percent but reflects strength, not weakness, in the labor market as discouraged workers, who stopped looking for work in May, re-entered the labor force in June. Other readings are mixed with average hourly earnings up only 0.1 percent for a plus 2.6 percent year-on-year rate and with the workweek unchanged at 34.4 hours. Data on factory hours are flat.

The payroll gain in June is what is striking in this report. Yet smoothing the big ups and downs, second-quarter payroll growth averaged a monthly 147,300 vs a more substantial 195,700 in the first quarter. The labor market is solid but perhaps slowing, this and still subpar wage growth (not to mention Brexit) may not be pointing to any urgency for a new Federal Reserve rate hike.

Recent History Of This Indicator:
After May's dismal 38,000 gain, nonfarm payrolls are expected to get back on track with a 180,000 gain for June. A revision to May, along perhaps with an upward revision to April's disappointing 123,000 gain, could be major factors in the latest report. A positive factor for June is the return of 35,100 Verizon strikers. The unemployment rate is expected to rise 1 tenth to 4.8 percent following May's 3 tenths plunge to 4.7 percent, a plunge not tied to rising demand for labor but to discouraged workers who left the labor force. Average hourly earnings were flat in May and another flat month is expected for June with the consensus calling for another 0.2 percent tick higher. Even if this report were to beat expectations, the impact on policy expectations would likely be minimal given ongoing concern over Brexit.