For Investors, an Ideal Jobs Report

  • By Justin Lahart,
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Goldilocks isn't dead, yet.

Friday's jobs report was everything investors could have asked for. It showed the economy added 213,000 jobs in June (https://www.wsj.com/articles/u-s-hiring-strong-in-june-unemployment-rate-rises-as-more-enter-labor-force-1530880292)-- more than the 195,000 economists expected--and that the May and April jobs numbers were revised higher. It also indicated that, despite the hiring gains, wage growth (read: labor costs) were still fairly muted, with average hourly earnings up 2.7% from a year earlier. The one blemish, merely skin deep in this case, was that the unemployment rate rose to 4% from 3.8%. That actually is good news because it came about because more Americans entered the labor force and were looking for work.

Broad, sweeping statements on the basis of one month's jobs report are ill-advised but endemic. Here is what the market may conclude this time:

First, the strong job gains reflect an economy that is doing well and companies that are experiencing growing demand. If employers are rattled by escalating trade tensions (https://www.wsj.com/articles/u-s-china-prepare-for-trade-battle- 1530824054), they aren't rattled enough to slow their pace of hiring.

Second, the wage figures and the growth of the labor force suggest there is still potential that the job market has left untapped. That reduces the chances of the economy overheating.

Third, the risk that the Federal Reserve will feel a need to ratchet up rates quickly has been reduced. The wage figures provide it with more leeway on policy, and the unemployment rate at 4% adds to its comfort level. The Fed will still keep raising rates, but in a predictable sort of way unlikely to upset markets.

Of course, all of these sentiments could be reversed by early August, when the next jobs report comes out. But for now, at least, the risk that the labor market somehow goes awry seems lower. There are plenty of things out there for investors to worry about. The job situation isn't one of them.

Write to Justin Lahart at justin.lahart@wsj.com (mailto:justin.lahart@wsj.com)

-Justin Lahart; 415-439-6400; AskNewswires@dowjones.com


  (END) Dow Jones Newswires
  07-06-18 1055ET
  Copyright (c) 2018 Dow Jones & Company, Inc.
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