Prior Week Summary
It was a relatively quiet week for data and trading activity as many market participants seemed to be out of the office for an extended July 4th holiday. The economic news of the week was the release of the June payrolls report which detailed that employers added 213,000 jobs last month, while upwardly revising the May report to 244,000. The unemployment rate increased slightly, to 4.0%, largely due to a 0.2% increase in the labor force participation rate. Job seekers benefited from a healthy improvement in average hourly earnings, which have increased 2.7% on a year-over-year basis. The June employment report brings the total number of jobs added over the course of the year to 1.3 million, an increase of roughly 200,000 from the prior 6-month average.
In aggregate, the report will likely confirm the Fed’s current tightening posture but does not seem to suggest that the Committee will need to increase the pace of rate increases from the current trajectory.
In other news, the U.S. placed tariffs on roughly $30 billion worth of imports from China on Friday as the ongoing trade tensions between the world’s two largest economies escalate. At current levels, the tariffs represent a tiny fraction of aggregate GDP but have the potential to become significantly more relevant if the tensions increase.
The Look Forward
For those of us not on vacation this week, the market will look forward to the minutes of the latest FOMC meeting on Wednesday and the results of the June employment report on Friday.
Sources: Bloomberg Finance L.P., (Treasuries) Chatham Financial (Swap Curves), FHLB Boston, Chicago, Dallas, Des Moines for FHLB Advance Rates. Wells Fargo Brokered CD Indications.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Source: Chatham Financial
Fixed Income Snapshot
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