Bill McBride at Calculated Risk, commented on the strength of the recent employment report. Indeed, the news was much rosier than expected. Tim Duy's Fed Watch agreed with market expectations of approximately 170,000 jobs. The WSJ Economic Forecasters expectations were slightly lower at 165,000 and they have typically underestimated payroll employment:
However, the graph above and the graph below hint at the Federal Reserve's continuing conundrum. Payroll employment seems to be consistently beating expectations, but inflation is lower than expected. The WSJ Forecast below is for June 2017 year over year inflation, and the trajectory of actual inflation it seems unlikely that we will break the Fed's two percent target.
The upcoming release of the July WSJ Economic Forecasts may provide more insight to where market participants think the Fed is heading. It is likely that the jobs report will boost both GDP and fed forecasts, but that relies on forecasters optimistic outlook on inflation.