NEW YORK (Reuters) – The U.S. economy maintained a moderate pace of job growth in July, but solid wage gains and a decline in the unemployment rate pointed to continued tightness in labor market conditions.

Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for June was revised lower to show 185,000 jobs added instead of the previously reported 209,000.

MARKET REACTION:

STOCKS: U.S. stock futures gained after the jobs data.

FOREX: The dollar index fell 0.26% to 102.170.

TREASURIES: The yield on 10-year Treasury notes slid 2.8 basis points to 4.161%.

COMMENTS:

MATTHEW MISKIN, CO-CHIEF INVESTMENT STRATEGIST, JOHN HANCOCK INVESTMENT MANAGEMENT, BOSTON

“The headline number is coming in below estimates, the ADP report again providing a head fake as it relates to the trends in the jobs market.”

“But I think the part that is hard to swallow for the Treasury market is the hotter-than-expected wage growth…This report puts a bit of question into whether or not the Fed is going to go ahead and hike in September.”

STUART COLE, HEAD MACRO ECONOMIST, EQUITI CAPITAL, LONDON

“A softer payrolls print from the U.S., coming in below expectations for the second consecutive month and with a downward revision of 49k made to the previous two months reading.”

“It adds to the growing body of evidence suggesting the US labour market is finally starting to slow down. But it’s not all good news. The earnings numbers have come in at a still strong annual reading of 4.4%, considerably higher than the 3.5% approximate level that is considered consistent with a 2% inflation target; and the overall unemployment rate has unexpectedly fallen to 3.5%.” 

“So overall, probably fair to conclude that the labour market is showing signs of cooling, but that it is happening very slowly and today’s numbers will do little to change the narrative of the Fed. The earnings numbers in particular will be of concern to the ‘hawks’ on the FOMC and will do nothing to dissuade them from arguing for another interest rate hike at September’s meeting.”

“If last month’s inflation reports showing pricing pressures starting to fade turn out to be accurate and that inflationary pressures are finally receding, then the outcome of the Fed’s meeting in September may well hinge on next month’s employment report.”

ALEX COFFEY, SENIOR TRADING STRATEGIST, TD AMERITRADE, CHICAGO

“It was weakening but the wages part was a little bit of warmer, so it sort of counteracted it. In the context of the last few days as well, it seems the market was already on shaky feet, combine that with some poor Apple earnings it was kind of ripe for a little weakness in equities so I’m surprised to see it actually holding on firm in green territory so far.”

“Continuing the trend of prior revisions going lower, although it was little bit more modest this time around. It was a miss though and we haven’t had a miss in quite some time, which is possibly seen as somewhat positive. It is sideways from the revision, it is modestly below the expectation so we are not necessarily overheating but it is slowing and so that is a little bit concerning obviously because once the slowness begins we can hope the Fed and everything kind of lands soft but you don’t necessarily know.”

“So there is always a little bit of concern with that. But the worst part of this from the Fed’s standpoint is yeah we are getting the slowing but what we are actually trying to slow isn’t actually slowing, it has actually firmed up a little bit which is the earnings component, versus forecasts at least.”

RANDY FREDERICK, MANAGING DIRECTOR OF TRADING AND DERIVATIVES, CHARLES SCHWAB, AUSTIN, TEXAS”I thought it actually would come in a little higher than expected because we had pretty high ADP numbers and we’ve also had fairly strong initial jobless claims for the latter part of June and in the early part of July, which is what should have played into this. So it probably should have a net bullish impact on equity markets.”

“It’s like some of the data we got earlier this week, not too soft and not too hot. It plays into the soft landing or the no landing narrative that the markets have been slowly trudging higher on.”

“This ought to relieve some of that concern about the fact that the economy is too strong, which would cause concern that perhaps we get another rate hike in September. Right now, I think that’s highly unlikely.”

PETER ANDERSEN, FOUNDER, ANDERSEN CAPITAL MANAGEMENT, BOSTON

“Everybody’s fear was that the jobs number would come in higher than expected, which it did not do today.”

“That gives investors some relief and also some further encouragement that the Fed will most likely be reflecting on these numbers in a positive way and hopefully it will support their decision to stop raising rates in the future.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN

“Wage growth may have been a touch hotter than expected, but when combined with a shorter workweek the aggregate weekly income number was tepid. There are broad indicators that the labor market is cooling. The diffusion index for manufacturing shows ongoing struggles for that sector. It’s a world with pockets of strength and areas of weakness. Based on this report alone, the Fed doesn’t have a strong case to justify further fiddling with the federal funds rate.”

(Compiled by the Global Finance & Markets Breaking News team)

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