Shock Jobs Report: Hiring, Wages Stay Hot As Unemployment Ties 53-Year Low; Dow Jones Falls

The July jobs report was strong, with unexpectedly low unemployment, leading to falls in the Dow Jones on the likelihood of sharper rate hikes.

The Dow Jones Industrial Average fell after the data.

The average hourly salary rose by 0.4% in the last month, compared to expectations of 0.3%. The 5.2% annual wage growth beat expectations of 5.0%.

The private sector payrolls increased by 471,000 jobs in July while the government's employment rose by 57,000.

Wall Street expected that the July jobs report would show an increase of 250.000 jobs, with 220,000 jobs in the private sector. For the fifth consecutive month, it was expected that the unemployment rate would remain at 3.6%. The combined job gains of May and June have been revised upwards by 28,000. The initial report of 372,000 new jobs for June has been revised to 398,000.

The wage growth is still strong but not enough to keep up with inflation. In June, the annual CPI rate was 9.1%.

The Labor Department's survey of employers each month provides the headline figures for employment and wages. Separate household surveys, which are used to calculate the unemployment rate of the country, show that the number of employed people rose by a moderate 179,000 during July.

The Dow Jones initially fell, but ended up closing Friday's market with a 0.2% gain. The S&P 500 closed down only 0.2%, while the Nasdaq dropped 0.5%.

The Dow Jones Industrial Average has gained 9.5% since its closing low on June 17, reducing its loss from the peak of January 4, to just 11.1%. S&P 500 is up 13.2% from mid-June and has climbed to within 13.4% its closing record high. The Nasdaq Composite has risen 19.5% since its bear-market bottom, but is still 20.8% off its record high.

The markets now price in a 68.5% probability of another 75 basis-point move during the Federal Reserve meeting on Sept. 20-21. Markets had about 60% odds that a half-point hike would occur and 40% of a 75 basis point increase.

The stock market is gaining momentum as Wall Street makes bets on the U.S. economic slowdown, which will allow the Federal Reserve to switch from raising rates to lowering them by the middle of 2023.

The 10-year Treasury yield has fallen sharply since its mid-June peak of 3.48%.

After the employment report, the yield on the 10-year Treasury note jumped 16 basis point to 2.84%.

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The leisure and hospitality industry added 96,000 new jobs. The number of factory jobs increased by 30,000.

The number of construction jobs increased by 32,000. Payrolls for health care and social services increased by 97,000. Retailers added jobs by 22,000, while transportation and warehouse jobs increased by 21,000.

The survey of households showed that there was a 179,000 increase in the number of employed people. The number of people actively seeking or working in the labor market, also known as those who are employed, decreased by 63,000.

The percentage of people aged 16 and older who are in the workforce has dropped to 62.1%.

According to the survey of American households conducted each month, there are 5.67 million unemployed Americans. This is now less than the 5,8 million unemployed people in February 2020 before the Covid Lockdown.

The July job report may have overstated the strength of labor market. After months of collecting more data, the jobs data may be revised. It's not clear if there will be major revisions, but here are some data points that may cause confusion. Over the last four months, the household study shows that the number of workers has decreased by 168,000. However, the employer survey indicates an increase of 1,68 million.

Initial unemployment claims rose 57% since mid-March to reach 260,000 for the week ending July 30.

IBD's analysis of the daily Treasury statements shows a rapid slowdown in the growth of federal employment and income taxes deducted from employee paychecks. The growth rate of these tax collections from mid-May to July 22 was 12%, but it slowed down to 7.6% in the 10 weeks that followed.

Comparatively, the Labor Department’s index of overall pay for the economy grew 9.7% in June compared to a year earlier. This aggregate figure is a reflection of the growth in hourly wages and total hours worked throughout the economy.

Follow Jed Graham @URL_ on Twitter for economic policy and financial market coverage.

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The post Shock Jobs Report - Hiring and Wages Hot as Unemployment Falls to 53-Year Low, Dow Jones Falls first appeared on Investor's Business Daily.