Non-farm employment increased by 147k in June, well above market expectations for a gain of 106k. Job gains for the prior two months were also revised higher by roughly 16k jobs.
Over the past three months non-farm payrolls gained an average of 150k jobs, roughly equal to the twelve-month average.
Private payrolls rose 74k, with most of the gains concentrated in health care & social assistance (+58.6k).
In the household survey, the increase in civilian employment (+93k) came up against a declining labor force (-130k), pushing the unemployment rate down by 0.1 percentage points (ppts) to 4.1%. Meanwhile, the labor force participation rate ticked down by 0.1 ppts to 62.3%.
Average hourly earnings (AHE) were up 0.2% month-on-month (m/m) – halving May’s gain. On a twelve-month basis, AHE ticked down to 3.7% (from 3.8% in May), with the three-month annualized rate falling 0.5 ppts to 3.1%.
Aggregate weekly hours fell 0.3% m/m after remaining unchanged over the past two months.
Key Implications
The June gain in non-farm payrolls outpaced expectations considerably, as non-cyclical sectors including health care and government carried the report. While federal payrolls continued to decline in June, state & local government payrolls recorded its largest gain in two and a half years. Absent this spike, the employment report would have come in roughly on-par with expectations. This combined with the cooling in average hourly earnings is indicative of a stable but slowing labor market, which we expect to gradually apply upward pressure to the unemployment rate through the second half of the year.
For its part, the Federal Reserve is unlikely to be deterred from their current patient stance on monetary policy given the stability of overall employment trends. This gives the Fed time to continue to assess developing inflation dynamics under tariffs. Market pricing currently expects the Fed to cut rates twice before year-end, with a first cut expected in September.
Eurozone PPI falls -0.6% mom in May, weak pipeline inflation
Eurozone PPI fell -0.6% mom in May, in line with market expectations, as falling energy costs drove the decline. On an annual basis, PPI decelerated from 0.7% to 0.3% yoy. Energy prices dropped -2.1% mom on the month, while prices for intermediate goods slipped -0.1% mom. In contrast, prices for durable and non-durable consumer goods rose 0.3% mom and 0.2% respectively mom. Excluding energy, producer prices still edged up 0.1% mom.
Across the EU as a whole, PPI also fell -0.6% mom and eased to 0.4% yoy. Among member states, Bulgaria saw the sharpest monthly drop at -3.7%, followed by Greece (-1.9%) and Finland (-1.8%). A handful of countries including Cyprus (+1.0%) and Latvia (+0.1%) registered modest price gains.
Full Eurozone PPI release here.