Stocks are flattish this morning ahead of a long weekend. The bond market closes at 2:00 pm. Bonds and MBS are down.
The economy added 57,000 jobs in June, according to the latest Employment Situation Report. The unemployment rate fell to 4.2%, while the labor force participation rate declined form 65.8% to 65.5%. The two month revision was -74,000. Average hourly earnings rose 0.3% MOM and 3.5% YOY.
The labor force fell by roughly 700k, while the number of people with jobs fell by 500k and the number of unemployed fell 200k. So while the unemployment rate fell, it appears that is being driven by people exiting the labor force.
Overall, this is not a great report, and bonds yields are declining slightly. I don’t think this moves the needle for the Fed given that inflation is still above their target, the economy is adding jobs, and the unemployment rate remains historically low.
The manufacturing economy decelerated in June, according to the ISM Manufacturing Report. New orders and production declined, however inflation moved markedly lower. Employment improved.
“In June, U.S. manufacturing activity remained in expansion territory, growing at a slightly slower pace as compared to the month before. Of the five subindexes that make up the PMI®, the New Orders and Production indexes grew slower as compared to the previous month, the Supplier Deliveries Index slowed at a slower rate, and the Employment and Inventories indexes improved with the latter entering expansion territory.
“In June, 34 percent of the comments were positive and 66 percent negative, with a 1-to-1.9 ratio of positive to negative sentiment. Among negative comments, the Iran war was mentioned in 31 percent and tariffs in 17 percent; 50 percent of the panelists mentioned pricing volatility as an issue for their companies.”
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Announced layoffs fell in June, according to the Challenger and Gray Job Cut Report. Job cuts fell 53% from the prior month, and are down about 4% on a YOY basis. AI was the reason for most of the job cuts.
Technology led all sectors: “Tech remains the epicenter of this year’s cuts. AI is the dominant force as companies are restructuring around it, automating roles, and reallocating budgets toward new capabilities. The sector is being reshaped in real time,” said Challenger.
