Sometimes the data enlightens, sometimes it frightens. And sometimes it simply tortures Mr. Market. The latter seems to be the operative theme with today’s release of the June employment report.
If anyone was expecting a clear signal from this morning’s update from the Bureau of Labor Statistics to lift the fog harassing the economic outlook, the numbers were something of a letdown. On the one hand, there’s fresh reason to think that inflationary pressures are still bubbling, as per the uptick in average hourly earnings, which posted a 3.9% rise last month over the year-earlier rate–the highest in five years. Score another point for thinking the Fed may still raise the price of money.
But the analysis is getting trickier by the day. Indeed, the job-creation machine continues to sputter, or so it seems, perhaps to the point of offsetting the inflationary worry that currently resides in the minds of the Fed governors. Consider that a Reuters poll called for a gain of 185,000 in today’s update on nonfarm job growth, based on the median estimate. What was dispersed was a number significantly lower than the crowd’s best guess. The government advised that 121,000 new nonfarm jobs were created last month, slightly ahead of May’s rise, but only slightly.
As the chart below illustrates, plotting monthly payroll changes on a rolling 12-month percentage basis shows that for the moment we’re going nowhere fast. Nonfarm payrolls rose by 1.4% last month over June 2005–the same rate of change that prevailed in April and May.

What’s more, June’s payroll advance was even closer to April’s 112,000 tally of new jobs. As signals go, the one being dispensed by the employment report has become a yawn of late. Even the jobless rate remained unchanged for June. What’s more, at 4.6%, last month’s unemployment rate has barely budged at all in 2006, remaining in a tight range of 4.6% to 4.8% in the first half of this year.
Expectations were primed for so much more, or at least something materially different after Wednesday’s dose of stats. In particular, that was the day when the National Employment Report from Automatic Data Processing (ADP) advised that private sector jobs exploded upward by 368,000 in June–the highest monthly rise in the five-year history of the somewhat obscure data series. The news attracted more than passing interest from the bond market, which reasoned that the Labor Department’s tally would follow suit, thereby setting the stage for more interest-rate hikes at the hand of the Federal Reserve. But the anxiety will no doubt wane for the moment after the anticlimactic news dispensed by the Labor Department today.
The divergence between the ADP report and the Labor Department’s survey raises more than a few questions, of course. Some of it has to do with variations in methodology, and we can already hear the grapevine buzzing with debate about which employment series captures the true essence of the economic trend.
In the meantime, Fed Chairman Bernanke and associates look poised to continue to stew in their statistical juices. The central bank has counseled recently that incoming data would play an increasingly important role in monetary policy going forward. As today’s report reminds, however, that heightened role isn’t guaranteed to be dramatically enlightening on any given day. Perhaps next week’s data will prove more enlightening.