June job report shows signs of cooling labor market.

Last month, the Federal Reserve Board took a breather from raising rates. They went into “wait and see mode” in order to determine what they would do next. Well, one data point they were waiting for arrived last Friday – the jobs report. Up until now the jobs machine has not taken a breather at all, and the strong employment situation has been putting upward pressure on inflation. We are sure that the Fed is not rooting for the economy to cut jobs, but a lighter pace of jobs growth would be something we expect they would be hoping to see. Thus, they waited -- what did they see?

The addition of 209,000 jobs was in the range of expectations. Expectations rose because of a strong ADP private payroll report the day before the job report was released. The headline unemployment rate dipped one tick to 3.6%. The previous two months of reports were revised downward by 110,000 jobs and part-time employment grew—both signs of possible weakness. In addition, wage growth came in at 0.4% monthly and 4.4% year-over-year – slightly higher than expected. These numbers were seen as mixed – the number of jobs added was moderate, but wage growth continues to be elevated. Certainly, this gives the Fed some food for thought when they meet in a few weeks.

Speaking of inflation, this week we will see the Consumer and Producer Price Indices. These indices are also watched by the Fed very closely. Last month, the May numbers showed inflation easing a bit more. We sure could use some more good news this month if the Fed would consider extending their pause when they meet in two weeks, something now considered unlikely. If they decide to wait until the next meeting in September, we can officially call it a summer vacation instead of a pause! But first, the inflation data.