Non-Farm Payrolls Miss Expectations, Markets Fall

Non-Farm Payrolls in June only grew 80 thousand in June, much less than the upwardly revised consensus estimate of 100 thousand by economists. Data for April and May were revised also, April's 77 thousand revised down to 68 thousand and May's 69 thousand was revised up to 77 thousand. The unemployment rate stayed constant at 8.2 percent.

On a non-seasonally adjusted basis (excluding the fancy mathematics used by the Bureau of Labor Statistics), non-farm payrolls grew 391 thousand, much slower than the 780 thousand pace of job growth in May. Further, quoting the news release, "the confidence interval for the monthly change in total nonfarm employment from the establishment survey is on the order of plus or minus 100,000." The BLS is saying that the actual number has a 90 percent probability of being in the range of -20 thousand jobs to +180 thousand jobs on a seasonally adjusted basis.

In worse news, the U-6 measure of unemployment, incorporating factors such as the marginally attached and part-time workers, rose to 14.9 percent from 14.8 percent. The rise in this measure of unemployment without a rise in the employment rate reflects the fact that the labor force grew in June by about 150 thousand people.

As people enter the labor force and do not find jobs, they become unemployed and detract from job growth. Thus, these new entrants either found part-time jobs or remained marginally attached, increasing the U-6 rate.

The shock miss of the data came one day after strong employment data was released. The ADP private sector survey showed that the private sector added 176 thousand jobs in June. Also, the employment sub-index of the ISM Non-Manufacturing Index showed strong services employment. Lastly, initial jobless claims edged lower and job cuts were seen falling in the month.

Non-farm payrolls are always subject to revisions, and so this weaker than anticipated number could yet be subject to revisions. In terms of policy implications, the data continued to be weak, however not nearly weak enough for the Fed to consider another round of quantitative easing. The Fed only printed in both 2008/2009 and 2010 when Non-Farm Payrolls dipped below 50 thousand.

Futures fell rapidly on the news but have settled at lower levels. Dow futures fell 75 points after being largely flat ahead of the data release. S&P 500 futures fell 8 points and were down 10 points and tech heavy NASDAQ futures were down 11.25.

Gold initially rose on the data point on hopes of further QE from the Fed, however it then proceeded to retrace its gains and fell 1.27 percent to $1,589.00 per ounce. Oil fell almost 3 percent to $84.77, as measured by the WTI benchmark. European stocks added to losses as the Spanish Ibex continued to fall, trading lower by 1.91 percent. The dollar index also spiked on the news.