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NFP: Revisions take the edge off of the headline miss – Wells Fargo

According to analysts from Wells Fargo, today’s NFP report shows that job growth  slowed but still the labor market continues to tighten. They see that along with a pickup in wages and lower unemployment, the labor market continues to strengthen and supports the Fed’s plan to hike next month.

Key Quotes:  

“Employment growth slowed in July, with employers adding 157,000 new jobs. July’s gain was somewhat weaker than expected, but came on the heels of a net upward revision of 59,000 to May and June. Healthcare, leisure & hospitality and temporary employment posted notable gains. Manufacturing also stood out with 37,000 jobs added””the largest monthly increase this year.”

“Average hourly earnings rose 0.3 percent over the month, keeping the year ago change at 2.7 percent. That is up from the 2.5 percent pace this time last year and, along with the stronger Employment Cost Index reading reported earlier this week, shows wage pressures have begun to intensify as the labor market has tightened.”

“Even with today’s miss, the trend in payroll growth remains solid. Employers have added an average of 215,000 jobs per month since the start of the year, which is up from an average of 182,000 in 2017.”

“Overall labor force participation was flat in July, but ticked up for prime age workers (ages 25-54). Slack continues to diminish both inside and outside the labor force, with the U-6 unemployment rate, which includes under-employed and marginally-attached workers, falling to the lowest rate since 2001.”

“On balance, today’s report is unlikely to change the Fed’s assessment that “the labor market has continued to strengthen,” as the overall trend in hiring remains strong, labor availability continues to decline and wages are moving higher.”

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