Is a 223,000 gain in payrolls enough to push the Federal Reserve to start normalizing its short-term rate of interest in September?

The June jobs report was less robust than the private ADP report released earlier in the week and was short of an expected gain of 233,000 according to a survey of economists by Bloomberg News. The report also saw weaker jobs creation than was first thought in the preceding two months. The net jobs revision was -60,000. And so the market reaction is one of stronger equities and weaker bond yields as investors hope that the environment remains ‘lower for longer’ from the Fed.

For all of 2014 the U.S. economy created 3.116 million jobs. In the first half of this year, the economy has generated 1.250 million jobs but is running at a 12-month pace of 245,000. At this time one year ago, the 12-month average pace of gains was less, and stood at 221,000. The reality remains that if 2015 is to beat last year in terms of net job creation, the rebound under discussion better kick-in soon.

And the fact that the unemployment rate fell by two-tenths to 5.3% also carries significant weight at the Fed. Justifying its wait-and-see approach is the static reading of average hourly earnings, where the premise is that a tightening labor market will ultimately fuel wage growth.

Over time, rising wages need to be checked. But there are few signs that workers are fanning the burning embers from previous inflationary cycles. The pick-up that was signaled by ADP and ISM reports, along with other anecdotal readings suggesting economic rebound, hardly showed up in the June jobs report. Nevertheless, the employment recovery clearly remains on track.

Chart shows jobs up, unemployment down.