Once Upon a Time…

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Once upon a time, there was a jobs market that was not too hot and not too cold. It was just right. The U.S. economy added an above-expected 213,000 jobs in June. Oh no, this is the 93rd straight month of job gains -the Fed may want to raise rates faster and risk inverting the yield curve. Not so fast. The employment rate ticked up from 3.8% to 4% as 600,000 people entered or re-entered the labor force. Good job opportunities are luring workers back to the market. The biggest gains in jobs added were in professional services, manufacturing and healthcare. The lower paying retail sector lost jobs last month. In addition to a little slack in work force, wage growth was a slight miss. Wages increased .2% or 2.7% year over year. This is below the 3-4% target the Fed would like to see. So, inflation is not huffing and puffing at the door yet. (Oops, wrong fairy tale.) The Fed will be looking at wage growth and the labor participation rate, which inched up to 62.9% as more stable indicators of the employment market. Investors should keep an eye out for the Q2 productivity measures due out in August. If workers can become more productive, the economy can continue to grow rapidly even with the below trend labor participation rate. The surge in private non-residual spending in Q1 (CAPEX) bodes well for a boost in productivity. Please watch Karyn Cavanaugh comment about the labor market and read the Global Perspectives: 2018 Mid-year Outlook – Confident Economy, Cautious Markets .

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