The economy, to draw on the vernacular, is cookin’ with gas. That’s the message embedded in this morning’s jobs report for July, a month that witnessed a 207,000 rise in nonfarm payrolls. That’s well above the 180,000 consensus forecast and the revised 146,000 gain for June, according to Briefing.com. But wait, there’s more: average hourly earnings jumped 0.4% last month, the fastest monthly pace since an identical rise a year earlier.
Although the unemployment rate remains unchanged for July compared with the previous month, standing pat at 5.0%, it’s hard to interpret the latest batch of data as anything other than bullish for an economy that seems intent on chugging along, if not picking up a bit of speed.
Employment growth was particularly strong in the retail group, where new jobs rose by 50,000 last month. That’s in contrast to virtually change in retail employment in June. In July, the Labor Department reports, “retail employment gains were widespread, including growth in clothing stores (13,000), motor vehicle and parts dealers (10,000), and building material and garden supply stores (7,000).”
Today’s jobs report will undoubtedly promote a fresh round of rethinking the appropriate level of money’s price. The Federal Reserve, as it turns out, meets next Tuesday, August 9, to consider just that conundrum, or increasingly, the lack thereof by way of Greenspan’s recent definition of the word. From today’s vantage, raising rates another 25 basis points looks set to be one of the more anticipated financial events in the coming week.
David Resler, chief economist at Nomura Securities, wrote to clients today of July’s jobs news, “Overall it is a consistently, solid report. Labor markets remain healthy and with the economy on the mend from the spring inventory correction, further [non-farm payroll] gains above 200,000 should become the norm.”
Such a norm isn’t exactly what the bond market had in mind a month ago, but, hey, things change on Wall Street. Indeed, the 10-year Treasury sold off sharply at the outset of today’s trading in the wake of this morning’s jobs data, thereby immediately pushing the yield on the benchmark bond up to nearly 4.4%, the highest in about four months.
But the growing realization that the U.S. economy isn’t giving up its growth bias without a fight has more than one implication. Indeed, sustained growth suggests that demand for energy will remain robust. In fact, buyers were keeping prices near all-time highs in early trading today. The bulls are also aided by worries that the latest installment of refinery problems will keep buyers at the fore. “With refinery problems at the moment and demand increasing in the fourth quarter, there is a chance prices could rise further,” Sam Tilley, an analyst with Sucden U.K. Ltd., a London broker, tells Bloomberg News. “The world seems to be getting used to $60 a barrel.”
The question is whether investors generally are also getting used to the idea of an economy that seems to finding its second wind.