Last night was the busiest period of earnings reporting since the June quarter reporting period began. There were some misses here and there, but in aggregate, the results held reporting-season form and were better than expected.
That understanding, along with the persistence of low interest rates, helped drive modest gains in the futures market in front of the Employment Situation Report for July. Those gains have been maintained after that report checked in mostly in-line with expectations.
In other words, there weren't any major surprises in the July employment report, so the reaction to it has been relatively muted. Be that as it may, the key takeaway from the report is that it fit that sweet spot yet again where job growth was strong but wage growth was not.
The Dow Jones Industrial futures are up 54 points, the S&P 500 futures are up 3 points, and the Nasdaq 100 futures are up 2 points, leaving them all trading slightly above fair value.
The notable headlines from the Employment Situation Report are as follows:
- July nonfarm payrolls increased by 209,000 (Briefing.com consensus 181,000). Over the past three months, job gains have averaged 195,000 per month.
- June nonfarm payrolls revised to 231,000 from 222,000
- May nonfarm payrolls revised to 145,000 from 152,000
- July private sector payrolls increased by 205,000 (Briefing.com consensus 175,000)
- June private sector payrolls revised to 194,000 from 187,000
- May private sector payrolls revised to 153,000 from 159,000
- July unemployment rate was 4.3% (Briefing.com consensus 4.3%) versus 4.4% in June
- Persons unemployed for 27 weeks or more accounted for 25.9% of the unemployed versus 24.3% in June
- The U6 unemployment rate, which accounts for both unemployed and underemployed workers, held steady at 8.6%
- July average hourly earnings increased 0.3% (Briefing.com consensus +0.3%) after increasing an unrevised 0.2% in June
- Over the last 12 months, average hourly earnings have risen 2.5%, unchanged from the 12-month period ending in June
- The average workweek in July was 34.5 hours (Briefing.com consensus 34.5), versus 34.5 hours in June
- July manufacturing workweek was unchanged at 40.9 hours
- Factory overtime was unchanged at 3.3 hours
- The labor force participation rate increased to 62.9% in July from 62.8% in June
Separately, the trade balance report for June was also released. It showed a narrowing in the trade deficit to $43.6 billion (Briefing.com consensus -$44.9 bln) from an upwardly revised $46.4 billion (from -$46.5 bln) in May.
The narrowing deficit was the result of exports being $2.4 billion more than May exports and imports being $0.4 billion less than May imports. Capital goods, except automotive (+$0.8 bln), led the export increase while industrial supplies and materials (-$1.06 billion), pressured by a $1.41 billion decrease in crude oil imports, drove the import decline.
The narrowing deficit should factor favorably in the revision to Q2 GDP, whereas yesterday's news that Special Counsel Robert Mueller impaneled a grand jury with regard to his investigation of Russia's interference of the 2016 election hasn't seemed to factor in much at all for the market.
The latter triggered a knee-jerk dip on Thursday, but it was nothing substantial.
By and large, it was another case of the market acknowledging the political headline, but choosing instead to press on with the knowledge that the fundamental forces of strong earnings growth and low interest rates are known factors serving as important sources of support while the unknowns from Washington continue to get sorted out.