Economic wrap-up post surprise nonfarm payrolls - Westpac

Analysts at Westpac Banking Corporation offered an economic wrap-up of end of last week's business.

Key Quotes:

"US non-farm payrolls rose 287k in June - the largest monthly increase since October 2015 and comfortably above consensus at +180k. Revisions to the prior 2 months were neutral, subtracting 6k. The details of the report are mixed but that should not change the overall message that the US recovery remains on track.

On the plus side the breadth of gains across industries is very encouraging, virtually all sectors seeing firmer reads in the month vs May: construction 0k vs -16k in May, manufacturing +14k vs -16k in May, retail trade +30k vs 3k in the prior month, information technology +44k vs -39k last month (Verizon strikers coming back to work) and business services +38k vs +18k last month.

The unemployment rate shot higher, +0.2ppts to 4.9%, though higher participation is a key part of that story (+0.1ppt to 62.7%).

On the negative side the employment to population ratio fell 0.1ppt to 59.6%, average hourly earnings barely budged, rising just 0.1%, the household survey of employment did not back the strong establishment survey (household employment rising just 67k) and hours worked were unchanged at 34.4.

Altogether the US labour market appears to have regained its composure, helping forestall concerns that the US economy is losing speed. The Fed is likely to note the improvement in their statement when they meet July 27 but against that they are also likely note heightened risks around "global and financial market volatility".

China’s CPI rose 1.9% yoy in June (vs 1.8% expected), slowing from 2.0% in May and well below the government’s 3.0% target. The PPI fell 2.6% yoy (vs -2.5% expected). Weaker commodity prices and economic growth will be seen as factors."