US June Employment “Biggest disapointment was the decline average work week and hourly earnings”

 

• · US June Employment - The June employment report confirmed that the economy lost some momentum toward the end of the second quarter. Private payrolls rose 83,000 last month, a little bit less than the first half average, but the more meaningful disappointments were the declines in the average workweek and average hourly earnings. Within both of these data points, the weakness was centered in manufacturing, consistent with the message sent by yesterday's ISM that industrial growth has crested. Outside of manufacturing, private service employment is looking like a turtle at a steady but slow pace. More generally, this report looks about in line with an economy growing in the neighborhood of trend. That's not bad, certainly better than a double-dip, but by no means great but if i was going to just give me personal opinion there is frigging way you get the patient off the operating table this time . Trend growth implies little move down in the unemployment rate. (Today's 0.2%-point drop in the unemployment rate to 9.5% was entirely due to a drop in the participation rate, possibly owing to Census and unemployment insurance technical factors.) 
• This leaves the Fed on extended hold, if there were any lingering doubts. From that perspective, perhaps the most troubling aspect of this report for monetary policy is the decline in average hourly earnings. The Phillips curve view held by the centrists on the FOMC has always seen disinflationary forces transmitted primarily through wage inflation; recent data confirms that view but also heightens concern that the disinflation process has not yet found a trough.