Today’s unemployment numbers for June caught almost all analysts by surprise. A surprise of 287,000 new jobs created in almost all sectors of the economy outside of mining and transportation/warehousing has the markets set to open higher.
It also brings about the question again of will the Fed raise interest rates in September. Earlier this spring most analysts felt the Fed would raise rates in June, September and December. That has been trimmed back to December only following the Brexit “leave” vote. However the June jobs numbers show that May’s numbers were a “bump” on the recovery road. The very sharp rebound in hiring confirms that the labor market is the healthiest it has been since the 1970’s and points to the economy continuing to expand for a seventh year.
September could be a likely target for the Fed to raise rates as it will mean a few more weeks yet of economic data for them to shuffle through and we should begin to see some evidence, if any, of a Brexit fallout in the United States and abroad.
Long-Term Unemployed No Longer A Concern
The unemployment rate rose to 4.9% from 4.7% as more people entered the labor force in June. The number of long-term unemployed had dropped to the lowest level in years. This is an area of the employment picture the Fed has been concerned about numerous times before. Those concerns are alleviated with the June report showing more long-term unemployed out looking for jobs.
May Numbers Downgraded
One area that was interesting was the poor May showing of just 38,000 jobs was lowered to just 11,000 new jobs making it the worst reading since 2010. April however was upgraded from 123,000 to 144,000 new jobs which helped offset the May downgrade.
Market Timing System Says Stay Invested
With June’s unemployment numbers in, the market timing system I use, which is based on unemployment numbers, points to staying invested in equities even with the possibility of a Fed Rate Hike as early as September.
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