Unemployment in the US rose from 4.7% in May to 4.9% in June even though the US created another 287,000 jobs in June. The number of jobs created far exceeded consensus forecasts of around 180,000 and while US 10 year bond yields initially rose on the news to 1.44%, they soon traded back lower to finish the day at 1.36%, down 3bps. The 2 year bond yield also fell back after the initial rise to 0.65% but still finished up 2bps at 0.61%.
Westpac’s fixed income trading desk referred to the bond market reaction as “astonishing” but senior economist Elliot Clarke pointed out the report contained both positive and negative aspects; jobs growth was higher than expected but the unemployment rate rose all the same; the participation rate was higher but the percentage of the entire population in work was lower. “All told, the June employment report reasserts that the US employment market remains in robust shape….For the FOMC, this is not enough to justify another rate hike; but it does allow them to keep their options open.” NAB took a similar view. “The data was seen as validating a continued wait-and-see approach from the Fed, with no US primary dealer surveyed after the data believing the Fed will move before December…”
