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U.S. June jobs growth was robust; 287,000 jobs added

NEW YORK (Reuters) - U.S. employers added 287,000 jobs in June, a surprisingly strong showing. The unemployment rate nonetheless rose to 4.9 percent from May’s 4.7 percent level as the labor participation rate rose.

Economists were not expecting even a strong report to prompt a July interest rate hike from Federal Reserve policymakers.

KEY POINTS:

*Non-farm payrolls increased by 287,000 jobs in June, the Labor Department said on Friday. Economists had been expecting 175,000 new jobs.

*Average hourly earnings increased a slight 0.1 percent to $25.61 in June.

*May’s payroll count was revised down to only an 11,000 increase from the previously reported 38,000.

*Verizon workers returning from a strike added some 35,100 workers

COMMENTS:

BRIAN JACOBSEN, CHIEF PORTFOLIO STRATEGIST, WELLS FARGO FUNDS MANAGEMENT, MENOMONEE FALLS, WISCONSIN

“That was a blowout number. 287,000 is a sign of strength even with the downward revision for May. Wages nudged higher, but didn’t sprint higher. It shows the U.S. economy was on pretty firm footing going into the Brexit vote. We’ll have to see how the economy weathers the increase in uncertainty from Brexit and the stronger dollar, but there’s reason to believe the Fed could start talking about a December rate hike. A hike into economic strength shouldn’t be bad for equities.”

DARRELL CRONK, PRESIDENT, WELLS FARGO INVESTMENT INSTITUTE AND CHIEF INVESTMENT OFFICER AT WELLS FARGO WEALTH AND INVESTMENT MANAGEMENT IN NEW YORK

“It’s a great number. The revisions were basically a non issue because you went down 21,000 for May and up 27,000 for April so a net down 6,000. It’s a very good report, yields are up, equity futures are up on it. It affirms to us that last month was an outlier. What you have to do before everybody gets too euphoric about it is to average these wild swings, 38,000 last month was not the true number and I would argue 287,000 is not the true number. So if you smooth those you are talking about 162,000, call it 165,000 a month which is about on trend and it is still considerably above the new entrants into the job market. So we are still creating jobs at a much faster pace than the workforce growth is happening.

“In our opinion the Fed is on hold for all of 2016. This affirms the economy is still on decent footing but it doesn’t change the Fed’s path.”

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“There’s an irony here, all this extremely robust number did was get the average back to where it was prior to last month’s swoon. Everyone’s losing their head over last month’s number, does it mean the economy’s losing steam etc, all we did was mean revert. Everyone’s trying to constantly create these narratives of why the economy’s losing steam. You have to take a holistic view, not just one number. When you do that what you see it’s still reasonable to hold a constructive view on the backdrop, and that was as true last month as it is this month.”

“The market has a lot to digest with what’s going on outside our borders. Do you think that changes the view of the Fed? It’s is not going to raise rates anytime soon, there’s too many other things for them to mull over with regard to how it will impact the U.S. backdrop.”

MICHAEL ARONE, CHIEF INVESTMENT STRATEGIST, STATE STREET GLOBAL ADVISORS, BOSTON

“It’s certainly well above expectations, and it looks like the markets are having a big sigh of relief here in that it wasn’t a continued weakness that would concern the market of a broader economic slowdown.

“Interest rate rises are off the table for July despite this good number. I don’t think this one particular number is enough to get the Fed to raise rates anytime soon. Add in ambiguity around Brexit and what’s going to happen in Europe that only furthers the argument that the Fed is likely to remain on hold.

“A lot of the things that have worked recently will continue to work. Stocks that pay dividends, bonds that have defensive-like characteristics and folks will want to own things that remain scarce. and right now top-line growth remains scarce.”

STANLEY SUN, INTEREST RATE STRATEGIST AT NOMURA SECURITIES INTERNATIONAL IN NEW YORK:

“The magnitude of the surprise on the headline is overpowering all the other weaknesses elsewhere. All in all, it is still a very good domestic number, but against a backdrop of global uncertainty. We’re still in a very uncertain environment, especially globally speaking, so I don’t think anyone was expecting this number to be a game changer anyway, so that’s why I think the long-end is remaining bid.”

“On the margin, it slightly increases the chance of a Fed hike in the near term. The same way the Fed downplayed the weak (May) number, this one could be the same reaction.”

JOHN CANALLY, CHIEF ECONOMIC STRATEGIST FOR LPL FINANCIAL, BOSTON

“This will turn the conversation away from recession and back to slow growth.

“Over past six months, monthly jobs growth has been 172,000 on average, a little bit of a downshift from past years, but still that’s enough to tighten the labor market and get the Fed’s attention. I think the question today people will be asking is, does this put the Fed back on the table for July? It’s going to get that conversation started but it’s probably a stretch for July given all the Brexit uncertainty.”

MARKET REACTION:

STOCKS: U.S. stock index futures rose sharplyBONDS: U.S. Treasuries pared losses; the 10-year yield was at 1.41 percentFOREX: The U.S. dollar jumped against the yen and rose to two week against the euro

Americas Economics and Markets Desk; +1-646 223-6300

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