US jobs growth bounced in June after a disappointing May reading as the labour market remained close to full employment despite a slight tick higher in the unemployment rate.
Wage growth also proved a blow to market expectations, even though it remained in advance of consumer prices, and looked likely to be another piece of the puzzle to be considered by the Federal Reserve in making future policy decisions.
Payrolls and unemployment
Non-farm payrolls data showed US employers added 222,000 jobs in June, higher than the upwardly revised May reading of 152,000, and well in excess of the 178,000 forecast by Wall Street analysts.
May's original reading of 138,000 had come as a big disappointment and many had expected upward revisions as seasonal factors eased as the month progressed.
The rate of unemployment, however, moved higher, climbing to 4.4% from 4.3% in May. Analysts had expected the rate to remain at 4.3%.
Another, larger, sticking point was the fall in average hourly earnings growth to 0.2% from 0.3% the previous month – leaving the annual rate at 2.5%, missing forecasts of a rise to 2.6%.
"The US economy may be creating jobs at a prodigious rate but those in work are seeing their paypackets get squeezed – and this is a big warning sign for the economy," said David Lamb, head of dealing at FEXCO Corporate Payments.
June's employment report sent mixed messages to the Federal Reserve – particularly in regards to future decisions on interest rate policy.
While the Fed has become markedly hawkish in recent months, looking to labour market strength to confirm its rake-hike cycle and the need for further increases, lower wage growth clouds the inflation outlook.
"Despite the Fed’s consistently hawkish tone, on this evidence Janet Yellen has plenty of grounds to hold off on the next rate hike," added Lamb.