The Employment Report was much better than expect, 528,000 from a 250,000 consensus. The revisions were up 28,000 in the two previous months.
The Household Survey rose 175,000 after three months in a row of negative jobs????
The Unemployment Rate dropped to 3.5% from 3.6%. The Average Work Week increased to 34.6 from 34.5. Importantly, the wages increases at a 5.2% rate from 5.1%.
There is little to criticize in this report. Below are some observations for perspective.
There were 96.000 new leisure and entertainment jobs!! There could be a bit of seasonal adjustment accentuation. The two previous July's were impacted by Covid inhibiting this area. The seasonals adjust to a lower level. The attitude this year is much more positive. This could boost seasonally adjusted data to exaggerate as we just get back to normal.
There were few signs of this surge. The PMI Employment readings were all below 50. However, one went from 47.7 to 49.0, an improvement for the month though still below 50.
In an Economic comments report, I mentioned a theory that business will could hold up during the Vacation season and begin to deteriorate in September as people are laden with more debt from expensive vacation.
Another big overview, the the YOLO phenomenon, you only live once. There has been major increase in travel and entertainment. The prices of hotels rooms and airfares have jumped sharply. It is important that companies are impacted in nominal dollars. The nominal GDP was up 10% and 8% in the first two quarters. This allows for more hiring and more profits for some companies.
The expected reaction is that the Fed is going to have to raise rates higher and stay for longer. This puts the Fed in a difficult position. I will discuss the complex impact on the markets in the Weekend report.
Jerry