A month ago, the BLS blindsided the market with news that somehow, the US economy added 2.5 million jobs in May. Consensus was looking for 7.5 million lost positions on top of the ~21 million layoffs from April.
The futility of predicting NFP headlines notwithstanding, a surprise of that magnitude and character (10 million plus the wrong sign in front) has never been witnessed on the world’s foremost top-tier data point — or at least not that I’m aware of. It forced market participants to rethink (if not rewrite) their scripts.
June’s print could scarcely be more important. And yet, interpreting it will be nearly impossible due to distortions both known, quantifiable, and otherwise. To let some GOP’ers tell it, the fate of extra unemployment benefits set to expire this month basically hinges on the June payrolls report.
With that in mind, the US economy added 4.8 million jobs last month, far more than the 3.06 million the market was looking for.
May’s blockbuster was revised up to 2.7 million, while April’s historic plunge was tweaked lower to -20.8 million. Net, the revisions added 90,000 to the previous two months.
The unemployment rate (which fell in May, defying expectations of a surge to Great Depression-like levels) came in at 11.1% for June. That is far better than estimates as well. Economists were looking for 12.5%.
This comes on the heels of an ADP report which, while coming up short of estimates, still showed the economy adding millions of jobs. It was accompanied by an absurd revision that bumped May’s reading all the way up from 2.76 million jobs lost to more than 3 million positions added for that month. The NFP number serves to underscore the message.
Manufacturing payrolls rose 356,000 for the month. Consensus was looking for 437,500. Private payrolls rose 4.77 million, blowing away expectations for 3 million.
“These gains reflect a partial resumption of economic activity that had been curtailed due to the coronavirus pandemic in April and March, when employment fell by a total of 22.2 million in the two months combined”, the government said.
Employment in leisure and hospitality surged, as did the numbers for education and health services, and retail trade. Construction employment increased 158,000. Government payrolls were little changed, with gains at the local level offset by state-level layoffs.
Average hourly earnings fell 1.2% MoM, and rose 5% YoY. Obviously, these numbers are of secondary importance right now, and not just because they’re distorted beyond recognition.
“The direction of US rates will be a function of the headline payrolls print”, BMO’s Ian Lyngen wrote Thursday morning. “This observation might initially appear beyond obvious, however the period immediately before the pandemic was characterized by an emphasis on AHE and more nuanced stats on the labor market”, he added. “Well, shedding 20 million jobs has quickly refocused investors on the core of the domestic economy”.
Indeed. Based on June’s figures, the “core” is reconstituting after an outright meltdown.
And just in time to meltdown anew thanks to the country’s apparent inability to get a handle on an extremely pernicious biological threat.