The June employment report was overall slightly on the weak side of expectations. Another 223,000 was added to US employment in June and the unemployment rate declined two notches to 5.3% . However, net revisions to April and May were -60,000 and average hourly earnings were flat on the month, with May growth revised down to 0.2% m/m from 0.3% m/m. This means that annual wage growth is now at only 2.0% compared with 2.3% in May and the gap between the wage measure in the Employment Cost Index and average hourly earnings is even wider.
The unemployment rate declined to 5.3% but this is was all due to a plunge in the labour force of 432,000 as the participation rated fell to 62.6%, from 62.9% - the lowest in this cycle. Employment in the household survey declined 56,000 but generally the measures in the household survey should be taken with a pinch of salt as the monthly volatility is high.
With average hourly earnings growth still subdued and total hours worked growing a modest 1.1% annualised over the past three months, our income proxy suggests that household income growth slowed in Q2 . However, with households still having a buffer from increased savings in Q1, this should dampen the impact on private consumption growth.
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