Strong Employment Report Gives Ammunition To Fed Hawks

The Bureau of Labor Statistics released the July unemployment numbers this morning and the report showed yet another month of strong job growth. Employment increased by 255,000 and the prior two months’ numbers were adjusted up by a combined total of 18,000 jobs. The unemployment rate maintained at 4.9%. And, importantly, hourly earnings increased at an annualized rate of 4%. This was well above the consensus forecast of around 185,000 jobs and once again showed continued strength in the labor market.

A poor jobs number in May seemed to dampen enthusiasm for a rate hike by the Fed anytime this summer. But the last two months of very strong employment results makes it clear that May was an anomaly and that the employment situation will not be a great concern to the Fed in the short term. Unfortunately, these strong reports, and especially the hourly earnings increase, will provide a little more ammunition to the hawks at the Fed who will want to see rates rise sooner rather than later. The next meeting of the Federal Open Market Committee (FOMC) will be on September 20-21 so it will be interesting to listen for any comments from Fed members between now and then.