Strong jobs growth means full steam ahead for the Fed


By Patti Domm

June job growth surged to a much stronger-than-expected 222,000, and 47,000 more jobs were added to April and May, putting the Federal Reserve on track to move full steam ahead in September, traders said.

Average hourly wage growth was shy of expectations, increasing 2.5 percent year over year versus expectations of 2.6 percent. The slight miss is not enough to cause the Fed to pause in its monetary tightening.

“The Fed has made it very clear their focus is not that narrow. Yes, the Fed would like to see wage growth accelerate, … the average hourly earnings is not going to change their view on inflation,” said Ward McCarthy, chief financial economist at Jefferies. Janet “Yellen and Bill Dudley and the minutes made it clear they have dismissed the transitory factors that are subduing inflation.”

Bond yields initially retreated as traders reacted to the softer wage growth, a nagging sign to markets that inflation is not improving. But the decline in the 10-year Treasury yield nearly reversed, and it was at 2.39 percent in morning trading. Bond yields have been rising recently on the view that global central banks, led by the Fed, are on the verge of moving away from easy policies.

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