KNOWLEDGE CENTER

Knowledge Center Archive

Aug
3
2012

Podcast: July 2012 Payroll Report

By Sean P. Simko

July’s labor data was not a game changer in our minds, but it was a step in the right direction. For a second month in a row, market participants were very optimistic leading up to the release of the report, as jobless claims had continued to point to a stabilizing labor market. The July ADP report, released two days earlier, sparked optimism with a strong print of 163,000 private sector jobs following June’s increase of 172,000. Overall, the labor market is stabilizing and in some cases showing signs of modest growth. However, stronger sustained growth is what is needed to shore up consumer confidence and reduce the unemployment rate.

SHOW/HIDE TRANSCRIPT

Welcome, my name is Sean Simko. I am Managing Director of SEI Fixed Income Portfolio Management. Today’s commentary focuses on the release of July’s employment data, including the nonfarm payroll number and the market’s initial reaction.

For a second month in a row, market participants were very optimistic leading up to the release of the report, as jobless claims had continued to point to a stabilizing labor market. The July ADP report, released two days earlier, sparked optimism with a strong print of 163,000 private sector jobs following June’s increase of 172,000. Overall, the labor market is stabilizing and in some cases showing signs of modest growth. However, stronger sustained growth is what is needed to shore up consumer confidence and reduce the unemployment rate.

July’s nonfarm payroll number from the Department of Labor printed at 163,000, an increase of 99,000 from June, which was revised lower, from 80,000 to 64,000. This was partially offset by upward revisions for May, resulting in net downward revisions of only 6,000 for the prior two months. Private payrolls increased by 172,000, showing that employers were hiring last month. This number was better than expected, but it is still too soon to call this a victory as the U.S unemployment rate ticked higher to 8.3%.

The stronger data pushed Treasury prices lower but only modestly. The 10-year Treasury yield fell to 1.52% after the data was released. As the data was digested, the 10-year moved back to levels witnessed a week earlier at 1.55%. The spread between the 2-year, 10-year curve steepened by approximately 5 basis points to 1.31%. Anchored by the Federal Reserve’s fed funds rate target, the 2-year held firm at a yield of 23 basis points, 4 basis points lower than the level following June’s employment report. The 30-year traded off to 2.63%.

July’s labor data was not a game changer in our minds, but it was a step in the right direction. The data may be viewed positively by the Fed, however, it does not solve the problem of sluggish economic growth. We need to see additional equal or greater strength in future readings to significantly reduce the unemployment rate.

If you have any questions about this podcast or the financial markets, please contact your SEI representative. Thank you.

 

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for educational purposes only.

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