INSTANT VIEW: Reaction to payroll data

WILLIAM SULLIVAN, CHIEF ECONOMIST, JVB FINANCIAL GROUP, BOCA

RATON, FLORIDA:

"The big news is the rise in unemployment claims to 404,000 which you must keep in mind because it's pointing to continued labor market weakness into the second half of the year.

"The report on the employment situation for June underscores the continued weakening in the overall economic environment. The big surprise was the maintenance of the nationwide unemployment rate at 5.5 percent. The unemployment rate took a huge jump in May, the largest monthly increase in 22 years, and there was the appearance of some statistical quirks that suggested there might be some rollback in June. That it held steady in June just underscores the poor labor market conditions as the second quarter came to the close.

"Another interesting development is the evidence of deterioration in service sector payrolls. We know we've been processing sharp declines in goods producing payrolls. It now looks like the service establishments have stopped hiring as well. We've turned very soft here in terms of hiring conditions overall, not just in the goods-producing sector."

CARL LANTZ, U.S. INTEREST RATE STRATEGIST, CREDIT SUISSE, NEW

YORK:

"They are all weak. There was 52,000 net revisions to the prior two months so minus 62,000 is kind of more like minus 114,000. Jobless claims were very elevated above 400,000.

"Trichet is on the tape right now being hawkish so the bond market is kind of getting pulled in both directions.

"The bond market is roughly unchanged to a little bit softer after the numbers. The market was geared up for weak numbers and so this isn't a big surprise relative to the whisper number. Now the focus starts moving toward what Trichet is saying and whether the Fed has to respond."

DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES INTERNATIONAL,

NEW YORK:

"Payrolls were pretty much in line with expectations and confirmation that the economy is weak and that weakness is likely to continue. It might even get worse. The weekly jobless claims probably tell us that next month's job losses could be even worse than this one. So far we have lost these jobs primarily because of attrition, not because of layoffs and now the layoffs seem to be starting to kick in.

"This does not change the big picture but other things have changed the big picture. The run on oil prices have led me to materially lower my forecasts for growth."

MICHAEL WOOLFOLK, SENIOR CURRENCY STRATEGIST, BANK OF NEW YORK

MELLON, NEW YORK:

"It was better than the whisper number, and consequently, the trifecta setting up for a dollar sell-off doesn't appear to be materializing. We don't expect the ECB's Trichet to come out and pre-commit on further rate hikes. We think he'll emphasize data dependency. There is hope euro-dollar will close today below 1.60, which should be viewed as a positive. I think the real fly in the ointment could be ISM non-manufacturing. The services sector is a very important part of the economy and ADP showed service sector losing jobs for first time in five years."

GARY THAYER, SENIOR ECONOMIST, WACHOVIA SECURITIES, ST. LOUIS:

"The payroll number was in line with expectations. It shows that the labor market still is very soft. We're not seeing dramatic job cuts, but clearly companies are trying to hold the line on costs. It suggests that it's still a rough economy. It does show that the Fed has to hold policy steady for now. We've now seen job cuts all year long and that suggests that raising interest rates now would probably hurt the economy significantly."

T.J. MARTA, FIXED INCOME STRATEGIST, ROYAL BANK OF CANADA

CAPITAL MARKETS, NEW YORK:

"The bond market is rallying. The initial reaction was that this negative 62,000 (in nonfarm payrolls) wasn't bad, but then you take a second look and it isn't all that positive on the jobs outlook. The unemployment rate remains stuck at 5.5 percent and then the initial jobless claims rose to 404,000. The trajectory there is not good. It is not horrendous, but the labor market is still in a deteriorating mode."

DAVID WATT, CURRENCY STRATEGIST, RBC CAPITAL MARKETS, TORONTO:

"The unemployment rate didn't come back but stayed at 5.5 percent which is quite disturbing just because there was a big jump in May and we would have expected a bit of a decline in June. And a downward revision to the prior payrolls report. Not as bad as the market was expecting but not a good report. We have to wait and see how the chips falls after Trichet speaks."

MARKET REACTIONS: BONDS: U.S. Treasuries turn negative after initial rise CURRENCIES: The U.S. dollar edges higher versus the euro STOCKS: U.S. equity index futures rise to session highs RATE FUTURES: Fed fund futures hold steady, with prospects for rate hikes between now and the end of the year down slightly.

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