Instant view: US job growth beats expectations in June

NEW YORK (Reuters) -U.S. job growth in June rose above expectations, while the unemployment rate fell, suggesting the labor market is stable.

Nonfarm payrolls increased by 147,000 jobs in June, after rising 144,000 in May, the Labor Department showed on Thursday. Economists polled by Reuters had forecast 110,000 jobs added last month.

The unemployment rate fell to 4.1% in June from 4.2% in the previous month.

On Wednesday, the ADP National Employment Report showed private payrolls unexpectedly fell in June, the first drop in more than two years.

MARKET REACTION

STOCKS: All major Wall Street indexes posted gains after market open, with the S&P last up 0.46%

BONDS: The yields on benchmark U.S. 10-year notes and on the two-year note rose after the jobs report

FOREX: The dollar advanced against major currency pairs

COMMENTS:

KEVIN O’NEIL, ASSOCIATE PORTFOLIO MANAGER AND SENIOR RESEARCH ANALYST, BRANDYWINE GLOBAL, PHILADELPHIA:

"The bond market clearly wasn’t expecting such a strong jobs report, including the upward revisions to the previous two months. While easing inflation continues to support the case for Fed rate cuts, a 4.1% unemployment rate significantly reduces the urgency for aggressive action. Notably, the gains came from the government sector, which had seen subdued job growth this year in part due to the administration’s initiatives. In terms of bond action, today’s data will likely help reverse some of the yield curve steepening that’s taken place in recent weeks."

ERIC TEAL, CHIEF INVESTMENT OFFICER, COMERICA WEALTH MANAGEMENT, CHARLOTTE:

"we continue to anticipate rate cuts are a ways off until we gain clarity that inflation is contained. However, with the passage of OBBBA on the horizon, changes in tax accounting for fixed asset depreciation and R&D outlays are significantly benefiting capital and R&D intensive industries which should continue to provide positive momentum toward the stock market."

JIM BAIRD, CHIEF INVESTMENT OFFICER, PLANTE MORAN FINANCIAL ADVISORS, SOUTHFIELD, MICHIGAN:

"The fact that the headline number was as strong as it was, was largely attributable to the big increase in state and local government jobs, particularly in education. I don't think there's any question that you're still seeing a softer hiring environment. Companies may not be laying off in mass yet, but they're certainly still in a little bit of a holding pattern in terms of hiring as they await greater clarity on the trade and tax front."

SIMON DANGOOR, HEAD OF FIXED INCOME MACRO STRATEGIES, GOLDMAN SACHS ASSET MANAGEMENT, LONDON:

"The FOMC’s conviction that it should hold its wait-and-see stance while it braces for an acceleration in inflation over the summer will only be strengthened. But we still see a path to a resumption of the Fed’s easing cycle later in the year should the summer acceleration in inflation prove more modest than expected, or the softening in the labor market exceed the relatively low thresholds implied by the dot plot."

JEFFREY ROACH, CHIEF ECONOMIST, LPL FINANCIAL, CHARLOTTE METRO:

"If businesses keep expanding payrolls like they’ve done so far this year, the Fed can comfortably sit in 'wait and see' mode at the upcoming policy meeting. Uncertainty around tariffs and trade have apparently not spooked businesses into shedding workers. One note of caution: the administration is still actively negotiating details with several major trading partners and the eventual business impacts are unknown.'

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:

“Apparently, the government has called back some of those laid off employees. Without government jobs, payrolls would have been anemic.”

“That takes us back to a September rate cut. On the other hand, if inflation should pop up from the tariffs, then they would probably go even out further and wait for December. But things but things staying the way they are now, I think we’ll get a rate cut in September. But I certainly rule out July.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:

"The large increase in the number of discouraged workers is disappointing. This is after a sharp increase in job openings, so there’s a disconnect between employers and potential employees that needs to be resolved. Those who have been without work the longest are also those having the hardest time finding work. With the diffusion index below 50, job gains are unfortunately narrowing."

(Compiled by the Global Finance & Markets Breaking News team)