What's going on?
Data on Friday showed that more jobs were created in the US in June than in any month since October of last year – and that’s pretty darn good news for the US economy!
What does this mean?
The headline number was exceedingly strong (287,000 jobs created in June) but it’s important to recognize that previous months were quite weak – so when one looks at the average of the past three months (as economists often do in order to figure out the trend), the picture is good but not great. That being said, it was a very solid report that goes a ways towards making up for May’s disappointing job growth. It also helps assuage fears that US economic growth is slowing materially – and that’s important.
Why should I care?
For the markets: Stocks appeared to love the data. US stocks jumped about 1.5% higher on Friday and are back near all-time highs. The consensus view is that the US Federal Reserve won’t raise interest rates soon and the economy doesn’t appear to be slowing like some feared. That would mean that conditions stay broadly supportive (e.g. low interest rates encourage more economic activity by making it cheap for companies to borrow money) while the economy’s moderate strength isn’t fundamentally threatened – which is likely a good combination for stocks.
For you personally: Wage growth might be cooling. Average hourly wages grew only 0.1% in June versus May and it would be quite disappointing if that sort of sluggish growth rate persisted. However, in the past year, pay has increased 2.6% – which is the highest rate since the 2008 financial crisis. The question is whether the decent job growth will continue and if that will also provide a boost to wages (as fewer workers are left on the side lines) – or if we’re in for a period of muted pay increases over the coming months.