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After a seriously disappointing jobs report, Wall Street is not pleased. Analysts and economists alike seem to be turned off by the disappointing headline growth number of just 38,000.
Almost all of the observers are of the opinion that a June rate hike by the Fed is off the table, and July is now much less likely. “The Fed will not hike in June or July,” said Neil Dutta at Renaissance Macro.
Additionally, commentators found little solace in the underlying details of the report. “We can’t find a positive nugget in today’s job report,” wrote David Donabedian, chief investment officer at Atlantic Trust Wealth Management.
We’ve rounded up comments from across Wall Street, check them out below.
Lindsey Piegza, chief economist at Stifel
“Holy weak growth, Batman! Any way you cut it, this morning’s employment report was downright disappointing, from the nearly half a million Americans dropping out of the labor force to the weakest monthly employment gain in nearly six years. Even the decline in the unemployment rate signals ongoing weakness in the US labor market.”
Millan Mulraine, deputy chief US macro strategist at TD Securities
“This was a very weak report, and the sharp falloff in the headline number along with the negative revisions speak to the dramatic slowing in underlying labor market momentum, feeding into the emerging narrative of weakening underlying growth momentum. For the Fed, this report will almost certainly remove any specter of a June hike, and it will raise the hurdle for a July hike. In that regard, we continue to see the September FOMC meeting as the most likely time for the Fed to move on rates.”
Michelle Meyer, US economist at Bank of America Merrill Lynch
“The May employment report was a miserable one, with only 38,000 in nonfarm payroll growth and -59,000 net revisions. The Bureau of Labor Statistics confirmed that the Verizon strike subtracted 35,000 from headline jobs, but accounting for that distortion is not enough to redeem an abysmal reading.”
Neil Dutta, head of US economics at Renaissance Macro
“With GDP tracking near 3.0%, the weak growth in aggregate hours worked means productivity has picked up in Q2. The bond market needs to be very careful about pushing hikes to 2017. The U3 unemployment rate is 4.7%, and hourly earnings are up 3.2% for the first five months of 2016. The Fed will not hike in June or July. But September looks good.”
Luke Bartholomew, investment manager at Aberdeen Asset Management
“These aren’t good numbers. The headline payrolls number is very weak. The unemployment rate fell, but for bad reasons: The participation rate has moved down again. This will give the Fed serious headaches. Just as they were gearing up for a summer hike, and getting investors comfortable with the idea, this spanner has been thrown into the works.”
David Donabedian, chief investment officer at Atlantic Trust Wealth Management
“We can’t find a positive nugget in today’s job report. If we were looking for signs of strength in this report, there is nothing to hang onto here.”
Alan Ruskin, global co-head of foreign exchange research at Deutsche Bank
“This data in combination with perceived Brexit uncertainties pretty much takes a June hike off the table. The broad concern from the Fed must be that the payroll trend from March through May has been for some clear slowing. July probabilities have gone down significantly. They are currently at 28% and unlikely to go much lower, since the Fed will likely make clear we are very close to full employment, and policy is highly accommodative, as the basis for maintaining a strong tightening bias.”
Ward McCarthy, chief financial economist at Jefferies
“This employment cycle has been marked by a series of mini-cycles in payroll growth. While job growth has been very impressive this cycle, periodic and transitory deceleration in job growth have been one of the characteristics of this cycle. Here we are again. Based on the behavior of the labor market to-date this cycle, payroll growth will again accelerate in the months ahead.”
Michael Feroli, Chief US Economist at JPMorgan
“The simplest explanation is that job growth tends to respond with a lag to GDP growth, and GDP growth was rather weak around the turn of the year. This would suggest job growth should recover along with overall growth in economic activity, but even if that does occur we think the days of steady 200,000-plus payroll figures are probably behind us.”
Omair Sharif, Strategist at Societe Generale
“As we noted earlier, the cooling in hiring is reminiscent of a similar episode in early 2014. Back then, the three-month average of job growth slowed from about 220,000 in November 2013 to 130,000 by February 2014 before rebounding sharply and averaging 265,000 over the following three months. Although initial jobless claims remain extremely low and job openings are at a record, the drop in the ISM non-manufacturing employment index suggests at least some cause for concern. At the very least, the picture is a bit more muddled than before.”