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The jobs picture is getting even worse, Philly Fed says

Amid the data deluge Thursday morning, one number may have stood out more than others, at least to the Fed.

While Wall Street watched weekly jobless claims and the latest inflation reading, a number tucked inside the Philadelphia Fed's manufacturing survey spelled more trouble for the economy.

While the overall reading of 4.7 pointed to growth in the sector after two months of contraction, the employment component was awful. That number came in at -10.9 for June, a big drop from the already weak -3.3 for May, a month when the U.S. economy generated just 38,000 new nonfarm jobs.

The regional indexes are calculated on a diffusion basis, meaning they gauge the level of expansion by companies against contractions. A negative reading, then, indicates contraction, or in this case more companies decreasing rather than increasing employment.

Albeit a volatile number, the employment gauge is particularly important in light of the Federal Open Market Committee's decision this week not only to hold off on raising interest rates but also to cut back sharply its projection for future hikes. Both the post-meeting statement from the committee and Chair Janet Yellen's remarks in a post conference cited labor weakness weighed heavily on the moves.

Many Fed watchers had been focusing on the Consumer Price Index reading, which provides a monthly gauge on where employment is heading. That report showed a "core" (excluding food and energy prices) gain of 0.2 percent, in line with Wall Street expectations. The headline number also was 0.2 percent, which actually was a notch below estimates of 0.3 percent and below the 0.4 percent gain in April.

Even with that modest increase, however, it was enough to erase any wage gains.

Concurrent with the CPI report, the Labor Department said the 0.2 percent gain offset a 0.2 percent gain in wages for the month. On a year-over-year basis, that put the real average hour wages increase at just 1.4 percent, a number that likely will give little comfort to Fed officials looking for wage gains as a sign that the central bank can start normalizing interest rates.

Following the morning reports, traders assigned a 9.5 percent chance for a July rate hike and only a 48.2 percent probability that the Fed hikes even once before the end of the year. The next rate hike is not fully priced in until January 2018.