Payrolls were up 280,000 last month in a better-than-expected jobs report, with employers adding jobs across almost all of the service industries and government. Positive revisions for April and May added another 32,000 to the payroll count. Analysts had been expecting around 225K jobs, so put May's initial print in the "upside surprise" column. The jobless rate ticked up slightly from 5.4 to 5.5 percent but for the right reason: more people joining the labor force. Average hourly wages were up 2.3 percent over the past year, a touch faster than in past months. All told, what I see in these numbers is a job market maybe, sorta, kinda starting to reach working people... six years into the recovery! So my message to the Fed: love it and leave it alone!
With Friday's numbers showing the addition of 217,000 jobs, the U.S. finally restored the 9 million jobs lost in the recession -- five years after it supposedly ended. But we can keep the champagne on the shelf: we still need an estimated 7 million more jobs to keep up with population growth; if we count those who've dropped out of the labor force, our current unemployment rate would actually be 9.7 percent; and, adjusting for inflation, hourly wages are actually lower now than at the end of the recession. So we may have recovered 9 million jobs, but we seem to have lost all sense of urgency about saving the middle class. Meanwhile, the swap of Sgt. Bowe Bergdahl for five detainees held at Guantanamo was as messy and ambiguous as the overlong war it sprung out of.
The U.S. has lost an important part of its global leadership role. The G7 and IMF lack legitimacy and credibility. And the G20 is still working on its operational effectiveness. All this speaks to continued uncertainty and volatility -- economic, financial, political and social. Since the world starts naturally long risk assets, we could well see more investors seeking less risky asset allocations, including cash in what they deem as "safe jurisdictions." In the process, valuations -- for bonds, commodities, currencies, and equities -- could well diverge for a while from what many deem to be historically fair valuations. As Will Rogers is said to have observed decades ago, investors should be concerned with the return of their money and not just the return on their money.