Big surprise as jobs jump by 287K in June

What happened in June? Talk about out-liers in the data series, this is one for you. Market expectations were for 180K new jobs in June, instead we got a 287K print. The ADP employment change yesterday showed just 172K jobs for June. Could this be the work of the birth-death adjustment?

We'll take it, it is a great number, though suspicious.

The U3 unemployment rate (no longer a meaningful measure of U.S. unemployment) came in at 4.9%. The real unemployment rate, the U6 rate, shows 9.6% unemployment. Average hourly earnings rose .1% as expected, and the average work week held steady at the recent lows of 34.4 hours. And both the labor force participation rate and the employment population ratio remained unchanged at 62.7% and 59.6% respectively. The areas showing big gains in employment are not a surprise; leisure, hospitality and heath and social services, and information services. The return of striking workers at Verizon helped boost the jobs number by tens of thousands.

Average Monthly Non-farm Payrolls 1976 - June 2016

As usual Table A7 at shows more displacement of native born workers by foreign born workers with another rise in the foreign labor force to 26.9 million, another rise in the foreign born labor force participation rate to 65.6%, and another increase in the employment population ratio to 63%. For native born workers those numbers went the other way.

Initial reaction to the number was positive with equities rallying, the U.S. dollar surging, and interest rates rising. However, if this number proves to be real and accurate, this changes the outlook for Fed rate hikes in 2016 and we can expect equities to reverse lower.

287K, the start of a new trend, a statistical trick, or just an out-lier. We'll watch for confirmation over the next month.

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