Highlights:

• In June, employment growth was above expectations (850k versus 700k) and accelerated from the previous two months. Government employment (+188k) played a big role and sectors whose activity is reopening continued to perform very well. But input shortages curtailed employment growth in automotive.
• Yet, the participation rate remained unchanged at a very low reading of 61.6%. Labour shortages are affecting hiring intentions: the employment component of the ISM manufacturing index came in below 50, showing that smooth job growth cannot be taken for granted.
• Hourly wage growth rose to 3.6% yoy, with leisure posting a +10% increase. Upside pressures on inflation coming from wages may lead the Fed to a quicker withdrawal of monetary stimulus, implying the risk of a first rate hike earlier than in mid-2023. However, doves may insist to keep accommodation with clear evidence that the constraints pushing up inflation are at the same time hampering activity and employment growth.

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