Can’t get much worse than the June jobs report

The second quarter was never going to go down as one of a strengthening US recovery but the June jobs report really rubs salt in the wounds with just 18k added to June payrolls vs. market median estimates of +105k which compares to the 120k+ needed to keep the unemployment rate steady (up 0.1% to 9.2% today).  This looks even worse when factoring in downward revisions to May and April leaving a net figure of -26k.  Hourly earnings were also flat m/m (mkt +0.2%) while hours worked slipped too (34.3 from 34.4).  The expected H2 upswing can’t come soon enough.


No surprise to see markets react negatively, the dollar and UST’s both gaining ground as risk was cut from books with the break in the 10-year in particular looking significant. It certainly shuts off higher targets towards 3.40%.  Bulls in fact should be now talking up a move back towards 2.85%/2.87% now.  We’re inclined to take a more constructive view on equities with the recent run up leaving quite a bit of profit on the table for the bulls which can be booked.  Technically a short-term dip back towards 1,314/17 in the S&P500 (ES1) looks feasible but we’d expect to see real money begin accumulating again in this band.



While recent data has been bad we think this should be pretty close to the trough, or at least expectations should readjust which in turn would give less bad figures at least some degree of positive shine.  Citigroup’s economic surprises index (measuring outcomes vs. economists’ estimates) provides some supporting evidence of this too.