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🦺💼UBS Review On June Jobs Report

US nonfarm payrolls for June came in at 850k, a bit above expectations for 720k and after a revised 583k (prelim 559k). The unemployment rate was 5.9%, higher than expectations of 5.6% and after 5.8%. Average hourly earnings were 0.3% month-on-month and 3.6% year-on-year, in line with expectations.

The NFP numbers are great for the Fed. People coming back to work, but no major wage pressures. This is just what Powell was talking about a couple of weeks ago at the FOMC, that in the next few months the jobs data would look good - state payment protection schemes ending, leisure and hospitality workers starting to come back in. Nothing to worry about on the inflation side, but the economy strengthens. That gives you a bear steepener on rates -long end puts some yield on to account for the better economy, but the short end doesn't need to worry much about Fed policy. In turn that supports the dollar. Helpful for the equity market - more people at work proving more spending, but again without the fear of the Fed. For the markets, that's a very helpful piece of data.

It fits into the narrative that the US economy is recovering well and without any immediate worries of a hawkish Fed response being required. I am surprised that the knee-jerk US Treasuries reaction seemed to lower in yield, and as a result the dollar is weaker. Possibly there was more fear about a bumper lm+ number in the market than I would have thought. There seems to be relief that the labor market continues to call for a dovish Fed and that on the basis of this number, the hawkish regional presidents will not be able to push too hard.



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