Payroll Growth Below Estimates, Hourly Earnings Rise More Than Estimates

- The Change in Non-farm Payrolls for July was 113K versus estimates of 144K and an upwardly revised 124K in June.
- The Change in Manufacturing Payrolls for July was -15K versus estimates of 5K and an upwardly revised 22k in June.
- The Unemployment Rate for July rose to 4.8% versus estimates of 4.6% and 4.6% in June.
- Average Hourly Earnings for July rose .4% versus estimates of a .3% gain and a downwardly revised .4% increase in June.

BOTTOM LINE: Employers in the US added fewer jobs than expected in July and the unemployment rate climbed, making it easier for the Fed to refrain from raising interest rates next week, Bloomberg said. Monthly payroll growth of about 100,000-125,000 is needed to keep unemployment stable, according to most economists. Average hourly earnings rose 3.8% from the same month a year ago. A labor market that is too tight generates rising unit labor costs, which account for two-thirds of inflation. Thus, the 10-year yield is falling 7 basis points on this news as investors’ inflation worries continue to decline at a rapid rate. I still expect the labor market to remain healthy over the intermediate-term without generating substantial unit labor cost increases. Today’s data make a Fed “pause” very likely. I suspect the “pause” will be a long one.