US payrolls not too far from consensus

 The June payrolls report was not far from consensus and pointed to a stabilization of conditions, albeit it at a low level. The headline payrolls figure of 80 000 was somewhat weaker than the 100 000 expected. The revisions of the previous two months cancelled each other out. Payrolls rose by 77 000 in May and 68 000 in April. However, the workweek lengthened a tad to 34.5 hours which resulted in an increase of the aggregate hours worked (combines number of workers and work time) of 0.4% M/M following a 0.2% M/M drop in May.

Another positive element was the smart rise of the payrolls of business services (up 47 000 from 24 000) and in this category the very cyclical-sensitive Temporary Help Payrolls which increased by 25 200 units following a robust 18 600 in May. Also the 0.3% M/M rise in Average Hourly Earnings is considered positive. The cyclical manufacturing sector created 11 000 jobs, which is virtually identical to the previous two months. Weakness was striking in the transportation and retail sector. The unemployment rate stabilized at 8.2%.

Conclusion: is the glass half full or half empty? Difficult to say. We see signs in the payrolls, confirmed by initial claims, ADP report and employment indices in the ISM surveys, that conditions are stabilizing. The number of net job creation is obviously too low to make inroads into the high unemployment and from this angle the report is not satisfactory for the Fed. However, it makes sense for the Fed to stick for now with its operation twist and wait for new information before eventually using the QE bazooka again. Stabilization often precedes an improvement. For markets, a number below 100 000 is considered bad though.