Labour market nearing full employment

The incoming labour market data, including the strong rebound in June payrolls, have confirmed our suspicions that the big declines in April and May were only a temporary blip rather than the start of a more worrying trend. There are plenty of good reasons to expect that labour market conditions will remain healthy in the months ahead. We think average monthly payroll gains will eventually settle around 160,000 in the second half of the year, which should be more than sufficient to put additional downward pressure on the unemployment rate. It remains to be seen, however, if the next two payroll reports will be strong enough to prompt Fed officials to raise rates at the FOMC meeting in September.