4 takeaways after June 2022 NFP Report

The main event of the trading week was the NFP Report released a few hours ago in the United States. It showed that the largest economy in the world added more jobs in May than the market expected – 390k vs. 325k, showing robust economic growth and dismissing fears of an upcoming recession.

It means that the Fed has nothing to fear moving forward regarding the monetary policy path. Everything in this job report supports the Fed’s hawkishness and the stock market because the economy keeps growing at a healthy pace.

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

Here are four key things to remember after today’s NFP Report:

• The Unemployment Rate remains steady
• Labor Participation Rate picks up momentum
• Wage growth is not spiraling out of control
• No signs of an upcoming economic recession

Steady Unemployment Rate

Every first Friday of the month, the Unemployment Rate in the United States is released at the same time as the NFP data. It is one of the things to watch and interpret together with the actual number of jobs created or lost in the economy.

Sometimes, the two pieces of jobs data diverge because the NFP number may show an improvement compared to the previous month, while the Unemployment Rate may show an increase. Therefore, only interpreted together, they will offer a clear picture of the jobs market.

In May, the Unemployment Rate was steady at 3.6%, just a little above the lowest levels seen in the past five decades (3.5%).

Higher Labor Participation Rate

Another positive of today’s jobs market report is the Labor Participation Rate. It ticked higher, showing that the labor supply rebounded in May. This is a key metric to look after, and the fact that the prime-age labor force participation rate and employment approach their pre-pandemic levels is encouraging for the US economic activity moving forward.

Wage growth stabilizing

Nominal wage growth is the number the Fed is most concerned about in its fight against inflation. But it is slowing down and not spiraling, suggesting that inflationary pressures may have peaked.

Economic reality dismisses the potential of an economic recession

Ever since the Fed began hiking the federal funds rate in response to inflation reaching a four-decade high, the financial media started to talk about an imminent recession. Even stocks corrected sharply from their highs.

But reality begs to differ.

Today’s data shows a big disconnect between the fears of a recession and what the actual economic reality signals.

For those fearing that the Fed may stumble and pivot from its hawkish plans, today’s data says the opposite. In fact, it opens the door to even more hawkish rhetoric from a Fed willing to bring inflation down to the target at (almost) all costs.