US: June NFP report should be encouraging for the Fed – Wells Fargo

The June official employment report showed a larger than expected increase in payrolls and the biggest number in ten months. According to analysts at Wells Fargo, June's jobs report “demonstrated that despite the continued headaches caused by the inability of many businesses to find the help they need, the labor market recovery has picked up speed.”

Key Quotes: 

“The jobs recovery progressed nicely in June, as employers added 850K new jobs. That marked the strongest increase since August 2020, with momentum clearly picking up over the past two months.”

“Despite stronger payroll growth, the unemployment rate ticked up to 5.9%. The rise stemmed from the household measure of employment slipping 18K even as the labor force rose, leading to a jump in the ranks of the unemployed. Given the choppiness of the household data month to month, the main message from the uptick is that the unemployment rate will be slower to descend over the remainder of the year as the labor supply improves, but we believe the trend remains downward.”

“Today's report should be encouraging for the Fed. Employers seem to be finding ways to step up hiring even given current constraints, as rising job opportunities and pay among prime-age workers seem to be unlocking labor supply. That said, a fuller recovery will still take time. We expect the labor supply to improve more meaningfully this fall as schools open for in person learning and any extent to which extra unemployment benefits are weighing on hiring fades.”

“Even with solid step on the road to “substantial further progress”, we do not think this report will hurry the Fed in its current thinking on when to eventually start tapering.”