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Week In Review


Nonfarm payrolls increased by 222,000 jobs in June, exceeding consensus estimates. Revisions to the previous two months’ reports resulted in an additional 47,000 jobs. The unemployment rate ticked slightly higher, from 4.3% to 4.4%, as labor force participation rose. Average hourly earnings rose just 0.2% in June and are up 2.5% year-over-year.

Our Take

This month’s employment report was a mixed bag. Significantly more jobs were created than expected, signaling an improving labor market. However, weak hourly earnings indicate there may be more employment slack than currently believed. While this month’s results help, the trend in job growth continues to be lukewarm.

FOMC Minutes

The Federal Reserve Open Market Committee (FOMC) released the minutes from its June meeting. The minutes show a general consensus among members toward continued tightening of monetary policy with one additional rate hike this year. However, when discussing the appropriate pace and timing of reductions to the balance sheet, the committee appears somewhat divided. Several members expressed confidence that the process of tapering should begin in the next couple of months. Others on the committee encouraged greater patience, waiting until later in the year in order to better evaluate how the underlying data evolves.

Our Take

It appears that rates are likely to increase one more time before the end of the year. Unfortunately, there is no additional clarity as to when the Fed will begin its balance sheet run-off.


Illinois state lawmakers voted to override Governor Bruce Rauner’s veto to pass a budget. Illinois had been operating without a budget for the last two years. The budget includes an income tax increase, from 3.75% to 4.95%.

Our Take

Illinois has a budget, but it was not easy. All of the political wrangling may end up driving Illinois credit ratings to junk, exactly what the state was hoping to avoid by passing a budget. The big question facing Illinois remains the same: how can the state balance spending, including massive unfunded pension liabilities, with revenue?