Although the headline non-farm payroll number came in at 206k jobs, which topped the forecast of 190k jobs, the internals of the report were weak. The unemployment rate ticked up higher to 4.10% versus the forecast of 4%. It is to be noted that the unemployment rate hit a 50-year low in January and April of 2023 at 3.4%. The June data has triggered the Sahm rule, a real-time recession indicator.
According to this rule, a recession is underway if the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more, relative to its low during the previous 12 months. This is a positive development for the metal. The previous two-month net payroll number was revised lower by 111,000. Average hourly earnings were in line with the forecasts though.
Earlier in the week, we noted that continuing claims were up for the ninth straight week, the longest stretch since 2018, which showed the difficulties people are facing in finding new jobs. In a notable development, the US ISM services sector unexpectedly contracted at the fastest pace in four years as the gauge of services slumped to 48.80 Vs the forecast of 52.70, though S&P Global US Services Index (June) rose to 55.30, the highest since April 2022. The ISM services data showed a second contraction in the last three months as new orders at 47.30 fell into the contraction zone.
The US-based employers announced 48,786 job cuts in June, according to Challenger, Gray and Christmas Inc., the highest number for any June since