Strong June Jobs Push Dow Above 17,000

07/03/2014 3:17 pm EST

Focus: MARKETS

Jim Jubak

Founder and Editor, JubakPicks.com

The strong payrolls numbers that came out on Thursday managed to help push the Dow above 17,000, reports MoneyShow’s Jim Jubak.

Even us professional nitpickers are hard pressed to find any flaws in today’s payrolls numbers. In June, the US economy added 288,000 jobs after adding an upwardly revised 224,000 jobs in May (up from an initial report of 217,000). The consensus among economists surveyed by Briefing.com had projected an increase of 210,000 jobs in the month. The median forecast among economists surveyed by Bloomberg looked for an increase of 215,000 jobs.

The official unemployment rate fell to 6.1% for the month from 6.3% in May. And that decline in the unemployment rate was a result of more workers finding jobs rather than workers leaving the workforce. The labor participation rate remained at 62.8% for a third consecutive month. The long-term unemployed—those out of work 27 weeks or longer—made up 32.8% of the unemployed. That’s a big improvement but the rate remains more than twice the historical average of 15.1% in the period beginning in 1948.

The numbers looked strong across the board. The manufacturing sector added 26,000 jobs and the much bigger service sector added 236,000 jobs. Retail picked up from an anemic May performance to add 40,200 jobs in May. Healthcare produced slightly fewer jobs in June (33,700) after a very strong May (58,000).

 Average hourly earnings increased by 0.2% in June, the same rate as in May. The hourly workweek stayed level. The increase in jobs—plus the increase in average hourly earnings—added up to a 0.5% increase in aggregate earnings. That should keep the consumer sector—about 70% of the US economy—growing.

Stocks—as you might imagine—loved this report. In today’s short session, the Dow Jones Industrial Average climbed above 17,000 (to close at 17068) for the first time ever. The Standard & Poor’s 500 climbed 0.55%.

The Treasury market was much less joyous as the strong jobs report convinced more bond traders that the Federal Reserve will start to raise interest rate sooner rather than later in 2015. Odds of a June initial interest rate increase climbed to almost 50/50.

The yield on the 10-year Treasury rose 2 basis points to 2.64% after reaching 2.69%—the highest yield since May 2—earlier in the short session that ended at 2:00 PM. (Remember bond prices fall as yields rise.) The two-year Treasury yield rose 2 basis points to 0.51%, the highest since September 2013.

A decision today by the European Central Bank to leave its benchmark interest rates unchanged also put pressure on US Treasuries. 10-year Spanish and Italian government bonds rose, pushing yields down. The yield on the Spanish 10-year bond fell 4 basis points to 2.69%.

But I do have one nit to pick—you’d be disappointed if I didn’t, right?  275,000 of the 407,000 workers who found work in June were only able to find part-time jobs.

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