Unemployment Falls to Lowest Level Since 9/11 Attacks, Inventories Rise Slightly

- The Unemployment Rate for June fell to 5.0% versus estimates of 5.1% and 5.1% in May.
- Average Hourly Earnings for June rose .2% versus estimates of a .2% increase and a .2% gain in May.
- The Change in Non-farm Payrolls for June rose to 146K versus estimates of 200K and an upwardly revised 104K in May.
- The Change in Manufacturing Payrolls for June fell to -24K versus estimates of -5K and -6K in May.
- Wholesale Inventories for May rose .1% versus estimates of a .5% increase and a .8% gain in April.

BOTTOM LINE: US employers added 146,000 workers in June and the unemployment rate fell to the best level since the 9/11 terrorist attacks in 2001. Wage gains are helping boost consumer spending. Wages and Salaries were up 7% in May from the same time last year, more than twice the rate of inflation. Retailers from Wal-Mart to Nordstrom posted their biggest sales gain in 13 months in June even with high gas prices, according to the International Council of Shopping Centers. I continue to believe job gains will remain modest, slowly lowering the unemployment rate while keeping unit labor costs in check.

Rising imports in three of the first four months of the year spurred warehouse construction and suggest inventory expansion continues to support economic growth. The amount of time wholesale goods went unsold, known as the inventory-to-sales ratio, was unchanged from April at 1.18 months. I expect inventory building to increase later in the year as companies gain confidence in a continuation of the current economic expansion and automakers inventories stabilize.