May’s employment situation from the Bureau of Labor Statistics [1] reported the lowest number of jobs added for one month (38,000) in six years. The weak jobs report was one of the main contributing factors to the Fed keeping the federal funds target rate at 0.25 to 0.5 percent in the June policymaking meeting despite widespread forecasts that a rate hike would occur.
Can the economy bounce back from May’s disappointing jobs report? The industry will find out on Friday, July 8, when the BLS publishes the June employment situation.
The effect of the recent Brexit vote on the U.S. economy and on housing are yet to be seen, but Fed Vice Chairman Stanley Fischer said late last week on CNBC that the Brexit vote will have a much greater direct impact on the European market than on the U.S. market, and as far as the U.S. economy, “most of the incoming data look good now” even after May’s dismal jobs report.
May’s report did contain some positives despite the low number of jobs added during the month. “The pickup in the average workweek and annual wage growth are encouraging, though neither improved enough to stand up and cheer,” according to Fannie Mae chief economist Doug Duncan. “More promising is the fall in the U-6 rate, the broadest measure of unemployment, which dropped to tie the lowest level since May 2008.”
As far as the effect of May’s jobs report on housing, Duncan said, “The paltry gain in construction jobs is an unfortunate hiccup for a market that needs more building.”
FOMC Minutes—Wednesday, July 6, 2:00 p.m. EST
The Federal Open Market Committee (FOMC [2]), the policymaking body of the Federal Reserve, will release the minutes from its June meeting on Wednesday at 2 p.m. Eastern time. The speculation has been rampant for six months about when the Fed will raise rates again after December’s historic liftoff; so far, four FOMC meetings have come and gone since then without another rate hike.
The Brexit vote last week caused many in the industry to speculate that another Fed rate hike will not occur for many months. In the statement on the June 14-15 meeting, the Fed said that growth in economic activity seems to have picked up, but “Although the unemployment rate has declined, job gains have diminished. Growth in household spending has strengthened. Since the beginning of the year, the housing sector has continued to improve and the drag from net exports appears to have lessened, but business fixed investment has been soft. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.”
This week’s schedule
Monday, July 4
Independence Day—Federal Holiday
Wednesday, July 6
Federal Open Market Committee minutes, 2 p.m. EST
Thursday, July 7
ADP Employment Report, June 2016, 8:15 a.m. EST
Friday, July 8
June 2016 Employment Situation, Bureau of Labor Statistics, 8:30 a.m. EST