June US employment: Softer than expected, but not decisive enough to alter the Fed’s outlook

At a gain of 223k with net revisions of -60k to previous months of data and flat earnings growth, the tone of the establishment survey was softer than we and consensus expected. May payrolls are now reported as rising by 254k versus 280k initially and April payrolls rose by 187k versus 221k as originally reported. The latest data bring the three-month average pace of payroll growth to 221k which returns, payroll growth to its sustainable trend. Payroll growth has slowed since its peak in the last quarter of 2014, It is expected that the boost from lower energy prices on activity and labor markets would gradually fade in 2015.

 It is believed, monthly payroll growth to average 225k over the remainder of the year and to continue driving the unemployment rate lower. The unemployment rate fell by three-tenths to 5.3% in June, driven by a similar-sized fall in labor force participation. Some of this decline is likely driven by the inherent volatility of the household survey, It is expected to outturn as consistently with that demographic factors will likely prevent a surge in participation over the forecast horizon.

FOMC Committee members are likely to view the drop in the unemployment rate and underemployment rate as partly due to statistical noise and point to flat earnings as indicative of labor market slack. Altogether, It is expected this report as significantly shifting opinions within the Fed about the timing of the first rate hike in September, though lingering uncertainty about the strength of incoming data and developments in the external environment could cause the Fed to delay the rate hike cycle says, Barclays