June Data Find the Economy Continues To Hum
The June service PMI will be far more insightful for potential Fed policy.
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*ADP sees mildly-softer job creation in June and only modest improvement in wages
*Job cuts fall in June versus May, but Challenger’s findings show companies ramped hiring plans during the month
*Why this morning’s S&P Global and ISM June service PMI reports are important
We’re starting Wednesday's abbreviated trading with a look at the first two snapshots of job creation in June. The quick takeaway is that the reports were supportive of an economy growing at or above trend with a relatively healthy jobs market and continued real wage growth. At 9:45 a.m. ET and 10 a.m. ET, S&P Global and ISM will publish their June service PMI reports, which will give us another take on June job creation but also round out the picture of the overall economy and inflation.
We’re reminding members that this part of the economy has been the driving force. So much so that the May data led to meaningful positive revisions for the Atlanta Fed’s GDP Now model, which offset the contraction found in ISM’s May manufacturing PMI report. If we see that repeat with Wednesday's June data, it would mean this week’s dip in that model to 1.7% for the June quarter is likely to be revised higher. That would extend the Fed’s runway for potential rate cuts later this year.
Because we find it far more insightful to examine data as part of a larger economic backdrop, once we review those reports alongside the two we discuss below, we’ll share any implications for our holdings in the portfolio.
ADP’s June Employment Report
ADP’s June employment report put the level of job creation at 150,000 during the month, modestly lower than the revised May figure of 152,000 and shy of the market forecast of 160,000. While this does mark the third month of slowing in the ADP data, it isn’t falling off the cliff and the somewhat steady state compared to May speaks to the upside surprise in the May job openings found in yesterday’s JOLTs report. ADP’s June findings also showed some progress on wage pressures with year-over-year wage gains for job stayers slowing to 4.9%, modestly down from the 5% level recorded for March to May. We did see another tick lower in wage gains for job changers to 7.7%, but that job openings data suggest we might see only modest improvement in ADP’s July figures.
Challenger Job Cuts Report and Its Surprise for June Hiring Plans
Turning to the June Challenger job cuts report, two things stood out to us. First, the total number of job cuts found was 48,786, down almost 24% compared to May. However, that June figure was the third month of greater job cuts compared to year-ago levels. Taking some of the sting out of that, the second finding was a bit surprising — in June, employers announced plans to hire 19,087 workers, the second-highest monthly total so far this year
To put some context around that, the June figure was up considerably compared to May’s 4,326 figure, and per Challenger, so far this year employers planned to fill 69,920 roles. That means roughly 28% of all plans to hire were had in June. We see these supporting comments found in recent PMI reports from S&P Global about firms hiring in response to improving demand in the manufacturing and services economies.
