Daily Market Color

Jobs Report Ends Week on Positive Note


May Payrolls Don’t Disappoint

The US economy added 223k jobs during the month of May, beating expectations of 190k.  While the April number was revised down from 164k to 159k, the two month net payrolls were revised upward, with 15k jobs added to the economy.  The unemployment rate dropped from 3.9% to 3.8%, the lowest level recorded since April of 2000.  The “underemployment rate” (U-6) fell again to 7.6%, down two tenths, reflecting fewer people working below their level of training / skill.   Though still at less than robust growth rates, earnings continue to move higher. Month-over-month earnings were up 0.3%, beating estimates of 0.2%, while year-over-year earnings were reported up 2.7%, beating estimates of 2.6%.  Average weekly hours remained flat at 34.5 hours, in line with expectations.  Overall, this data is indicative of continued strength in the US labor market.


The labor force participation rate dropped one tenth to 62.7%, remaining close to the lowest levels of labor force participation in the past 40 years.  Some of the changes to the labor force are structural, as you have a large percentage of the population, baby boomers, hitting retirement, while more young people are opting to spend more time in school before beginning their careers.   Larry Kudlow, Director of the National Economic Council, seemed upbeat about the outlook and unconcerned about the shrinking labor force when he spoke to CNBC this morning and noted that as wages rise, so should participation in the labor force. “This is a prosperity era. It’s a strong economy. What you’ve got here is continued job growth, low unemployment, and participation rates pretty good,” said Kudlow.


US North Korea Summit Back On

In a rare but not unprecedented move, President Trump today met with Kim Yong Chol, a diplomat and senior intelligence official in the North Korean government.   It was the first meeting between a sitting US President and North Korean official at the White since 2000, when Bill Clinton was president.  After a series of meetings and a letter from Kim Jong Un was hand delivered to the President, it seems as though the June 12th meeting in Singapore has shifted back to being likely to happen. “We’re meeting with the chairman on June 12 and I think it’s probably going to be a very successful — ultimately a successful process,” President Trump commented.


Risk on for Jobs!

All markets seemed to be buoyed by the overall positive employment report this morning.  US Treasurys sold off throughout the trading session, with yields/rates climbing 2-5bps across the curve.  The 10-year note yield is poised to finish the week near 2.90%, roughly where it opened Tuesday, although during the week the yield had fallen as low as 2.78% on concerns about the future of Italy’s participation in the European Union.  There was no shortage of other  news for the market to digest this week: escalating trade issues, a strong report from the US Department of Labor and finally a US North Korea summit looking much more probable.  Major stock indices were all higher on the day, with the DJIA gaining 0.90% and the S&P 500 climbing 1.08% .  The Nasdaq  had the best day and was up 1.55% — closing at the highest level since mid-March.  In commodities, crude oil futures continued their move lower as WTI crude fell  2.1% to $65.58/barrel, on news of increased domestic output.  The US Dollar (USD) was mixed: up 0.3% vs the Euro (EUR) and down 0.4% vs the Pound (GBP).


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