The July payroll report on U.S. employment backed up the strong June report with another favorable sign for hiring. July non-farm payrolls rose by 255,000, with a net 18,000 positive revision. The unemployment rate held steady at 4.9%.
After the strong June and July reports, the six month average of payroll gains moved up to 189,000 in July from 150,000 in May. This level of job creation is enough to modestly bring down the unemployment rate moving forward. The most favorable statistic from the report was the uptick in average hourly earnings, which rose a healthy 0.3% month-over-month and 2.6% year-over-year.
Stocks rose modestly and bond yields increased on the report. For the last few weeks, market volatility has fallen. So why are we not seeing more reaction to the economic data? I believe the answer exists in overall business confidence, which remains subdued. Until we see an improvement, economic growth and inflation will remain modest. Expect markets to stay range bound in the near term.
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