Plain Good News

By Alex Eule | Friday, July 2

Good News Is Good News. The monthly delivery of jobs numbers often brings out a strange rooting interest from investors. Weak figures are celebrated because they lead to more accomodative policies from the Federal Reserve. Good numbers can lead to a selloff. But this month, everyone was in agreement: An improving economy is good for everyone.

The U.S. added 850,000 jobs in June, nearly 200,000 more than economists expected. And while that alone could have been reason for the Fed to get more aggressive with interest rate increases, a slower-than-expected rise in wages is likely to mean the status quo of low rates and bond buying holds for a while longer. 

Average hour wages were up 0.3% in June from a month earlier, lower than a Wall Street forecast of 0.4%. That suggests inflation is in check, reducing the Fed's need to take quick action. The wage data lend credence to the Fed's view that inflation remains transitory.

Surprisingly, the unemployment rate ticked up to 5.9%, from 5.8% in May. Barron's Lisa Beilfuss notes that unemployement, while down from a peak of nearly 15% in April 2020, is still above a pre-Covid rate of 3.5%. She explains why the rate unexpectedly rose in June, even as jobs numbers were better than expected. 

The Dow Jones Industrial Average rose 153 points, or 0.4%, today to an all-time high. The S&P 500 and Nasdaq Composite also hit new highs, each rising 0.8% on the day.

It was the S&P 500's seventh consecutive record close, the longest streak since June 1997. The Nasdaq, meanwhile, is just a few strong days away from the 15,000 mark. 

While the rise in unemployment might be unsettling, some on Wall Street see it as a temporary blip. Here's more from Lisa: 

[Economist Thomas] Simons of Jefferies said he is included to look past the June rise in unemployment. The drop in long-term unemployed and increase in short-term unemployed suggests the labor market may be in a state of transition with many states ending their enhanced unemployment benefits programs, he said, adding that he expects further downward pressure in the unemployment rate in the months immediately ahead.

Maybe good news is finally just good news.

Review & Preview will be off Monday. We'll be back in your inbox on Tuesday night. Have a happy and safe Fourth of July. 

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