The market's angst over the underlying trend in the US labor market eases with the help of the second consecutive robust report. The 255k rise in non-farm payrolls was well above expectations, and the details were mostly favorable. There were upward revisions to the May and June reports.  

Average hourly earnings rose by 0.3%, a little more than expected, and when rounded, the year-over-year rate of stayed at 2.6%, which matches the cyclical high, and will likely support consumption. The 9k increase in manufacturing and the overall rise in the workweek bodes well for output. The participation rate ticked up. The underemployment rose to 9.7% from 9.6%, which may have been the only poor element of the report. 

The renewed vigor in the US labor market is helpful, but it does not address the main headwinds on the US economy, which explain the sub-2% annualized pace of growth over the past nine months. That weakness stems from the dramatic inventory liquidation cycle and ongoing poor business investment. Nevertheless, we suspect that the strength of the labor market undergirds the confidence of Fed policymakers. Real final demand (GDP excluding inventories and trade) appears to be understood as a more reliable guide.  

Canada's employment report was poor. Canada lost 71.4k full-time jobs in July after businesses shed 40.1k in June. The unemployment ticked up (to 6.9% from 6.8%), while the participation rate slipped to 65.4% from 65.5%. Adding insult to injury, Canada also reported a record trade deficit for June. What was the record shortfall in May was revised to show even more red ink. Another series of reports like these and the Bank of Canada's optimism about a recovery in H2 may be dashed.  

We do not expect today's jobs report to significantly boost the market odds of a Fed move in September. There are too many moving pieces, and the meeting is not until late-September. Still, the data may limit how far the dollar will fall after appreciating (on a real trade-weighted basis) for the past three-months.