#NFPWatch Stronger-Than-Expected Headline, But Dig Deeper

The headline figure showed a stronger-than-expected increase of 147,000 jobs in June, surpassing the consensus forecast of 110,000. This certainly sounds like good news for the US economy, suggesting continued resilience in the face of various headwinds. The previous two months' data also saw upward revisions, adding another 16,000 jobs.

However, a closer look at the report reveals some nuances that warrant attention:

* Unemployment Rate: The unemployment rate surprisingly dropped to 4.1%, defying expectations of a slight tick higher to 4.3%. This is largely attributed to a significant increase in government employment.

* Private Payrolls: Despite the robust headline, private payrolls came in at a weaker 74,000, the lowest level since October 2024. This suggests a potential underlying softness in the broader labor market when government hiring is excluded.

* Average Hourly Earnings: Wage growth, a key inflation indicator, rose by 0.2% month-over-month, undershooting the expected 0.3%. While this might seem mild, it could offer some comfort to markets concerned about persistent inflationary pressures.

Market Reactions: USD Rallies, Rate Cut Hopes Dim

The immediate reaction to the stronger-than-expected NFP print was a rally in the US Dollar (USD). A stronger labor market generally signals to the Federal Reserve (Fed) that the economy is robust enough to handle current interest rates, and potentially even less likely to cut them in the near term.

Indeed, the market is now reportedly seeing only a 23% chance of a rate cut in July, with eyes shifting towards September for any potential easing.