As it has each month since March, personal income rose +0.4% in June, with inflation adjusted after tax income rising +0.3%. The gain in income helped support a +0.3% increase in consumer spending and boosted the personal saving rate up +0.1% to 8.1% of after tax income. Spending on motor vehicles dropped at a seasonally adjusted annual rate of -$3.6 billion, which dragged down overall durable goods spending by -$1.5 billion, but +$7.1 billion in spending on food and $10.2 billion in spending for other nondurable goods (e.g. pharmaceuticals or household supplies) helped raise nondurable goods spending up +$19.6 billion. Inflation ticked up +0.1%, maintaining a 1.4% annual rate, while core PCE inflation, which excludes food and energy costs and is the Federal Reserve’s preferred gauge for inflation, was up +0.2% for the month and +1.6% for the year, well below the 2.0% target rate.

Citing slowing global economic growth and muted inflation pressures, the Federal Reserve voted to lower the federal funds target range by 1/4 point to 2 - 2-1/4 percent, with two board members voting to maintain the existing rate. The board also voted to conclude its reduction in System Open Market Account aggregate securities holdings in August, two months earlier than originally planned. The meeting statement noted that while household spending had been increasing, business fixed investment has been soft. The statement also reiterated that a sustained expansion, strong labor market and 2% inflation were the most likely outcomes but indicated that uncertainties remained.

There were 164,000 jobs created in July, but the participation rate rose from 62.9% to 63.0%, keeping the unemployment rate at 3.7%. Private sector hiring increased for professional services (+31,000), health care (+30,000), social assistance (+20,000), financial activities (+18,000) and manufacturing (+16,000), but fell for information services (-10,000), mining (‑5,000), and retail (-3,600). Government hiring increased for the second consecutive month with 16,000 hires in July following 14,000 in June. Hourly earnings rose $0.08 to $27.98/hr, up +3.2% for the year, with production/nonsupervisory employees gaining $0.04 to $23.46, up +3.3% for the year. The more comprehensive U-6 unemployment rate, which also accounts for underemployed and marginally attached workers, dropped -0.2% to 7.0%, down from 7.5% a year previously.