(Reuters) - U.S. job growth increased more than expected in June, which could draw the Federal Reserve closer to implementing a plan to start scaling back its massive monetary stimulus later this year. Employers added 195,000 new jobs to their payrolls last month, the Labor Department said on Friday, while the unemployment rate held steady at 7.6 percent as more people entered the workforce.
KEY POINTS: * The government revised payrolls for April and May to show 70,000 more jobs created than previously reported. * Economists polled by Reuters had expected employment to increase 165,000 last month and the jobless rate to fall a tenth of a percentage point to 7.5 percent. * The closely watched employment report was released two weeks after Fed Chairman Ben Bernanke offered an upbeat assessment of the economy's outlook and said the U.S. central bank expected to start trimming its bond purchases later this year.
CRAIG DISMUKE, CHIEF ECONOMIC STRATEGIST, VINING SPARKS, MEMPHIS, TENNESSEE:
"Overall this is an encouraging report. This keeps the tapering notion on. We really need a bad report to change what the Fed wants to do. This should put more pressure on bonds and also on stocks but they (stocks) are catching up with what happened with the ECB yesterday."
JOHN BRADY, MANAGING DIRECTOR, R.J. O'BRIEN & ASSOCIATES, CHICAGO
"At the end of the day, this number keeps the Fed tapering at the September FOMC on track. The market is reacting with the idea that the Fed will begin tapering in September."
TODD SCHOENBERGER, MANAGING PARTNER, LANDCOLT CAPITAL, NEW YORK:
"Traders are going to love this. You have a positive sign on the headline news, but you have that critical unemployment number continuing to hold steady, which means that you're going to have the markets get exactly what they want - continued QE and Fed intervention.
"What we really need going forward is obviously you need more jobs, but you need a GDP print of at least 3 percent in the third quarter to just the Fed to begin tapering back on the $85 billion per month."
SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA:
"I think at face value it's a fairly strong report. It suggests that the job market is getting in better shape here. You do have some concerns about the manufacturing sector, because a lot of the numbers have been a bit spotty, and in this case you have a small drop.
"The initial reaction in the markets does look like good news is good news. Stocks are higher, bond yields are moving higher. The sentiment was already positive heading into this report. I think the markets were braced for an upside surprise, and I think this exceeded even that optimism."
IAN LYNGEN, SENIOR GOVERNMENT BOND STRATEGIST, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:
"The participation rate increased, which is a positive sign because it suggests that a firming employment market has brought more workers back into the market.
"The outright level of private nonfarm payrolls growth was higher than expected and accompanied with higher upward revisions to the prior. The market sold off in line with that, 10 year yields got as high as 2.66, which is near the key support that we've identified from the prior yield peak of 2.665. A bit of a universally strong report, which has been accompanied by a solid selloff in the Treasuries market. This certainly increase the probability that the Fed tapers at the September meeting rather than later in the year."
KATHY JONES, FIXED INCOME STRATEGIST, CHARLES SCHWAB, NEW YORK:
"Very healthy number, especially with the increase in the upward revision to the previous couple of months that brings the average rate up in the 190s. We've got a higher plateau now, which is good, it's pretty close to the 200,000 per month that the Fed was looking for, which is a sign we're making progress. A little pickup in the labor participation rate, which is healthy, it shows people coming back into the market. The rate staying unchanged is a nonevent. this would certainly put us on track for that September time frame (for the Fed tapering). They've been very focused on the labor market. I think this tells them the labor market is improving gradually."
STOCKS: U.S. stock index futures rallied on the news
BONDS: U.S. bond prices sold off
FOREX: The dollar gained against the euro and yen
(Americas Economics and Markets Desk; +1-646 223-6300)