June's strong jobs report dashes some recession fears, but it is not a strong enough catalyst to get the Fed moving yet on hiking interest rates.
A surprising 287,000 jobs were created in June, more than 100,000 above forecasts. The number was viewed as payback for a stunningly weak May report, which was revised even lower — from 38,000 to 11,000.
Stocks surged and Treasury yields moved higher. The dollar reversed earlier losses. Treasury yields in the 10-year and 30-year durations initially rose, but they later fell as buyers influenced by low global yields continued to move into the long end. Market expectations for a Fed rate hike this year increased. Fed funds futures implied a still-low 24 percent chance of a hike for December, but that was up from 12 percent Thursday, according to Jefferies.
"It's still not enough to move the needle for the Fed," said Tom Simons, money market economist at Jefferies. "They'll want to see a couple more months of these and a couple months of calm in financial markets."
The unemployment rate rose by 0.2 to 4.9 percent, but Simons pointed out the rise paralleled a slight improvement in the participation rate to 62.7 percent, indicating the workers listed themselves as unemployed. "Job openings are at their highest level in 15 years, so they'll probably get a job quickly," he said.