KEY DATA: ISM (Non-Manufacturing): -0.2 points: Orders: +0.7 point: Hiring: +2 points/Claims: 315,000 (up 2,000)
IN A NUTSHELL:  “The service sector remained solid in June and with orders strong, that should continue.â€
WHAT IT MEANS: Normally, the Institute for Supply Management’s surveys take center stage, but on a day where we got a huge employment report, this is probably a tree falling in the forest: It makes noise but few hear it. The service sector grew in June but not quite as strongly as it had been over the previous few months. Still, two key components of the index, new orders and employment, rose solidly. Indeed, the orders index is quite high, indicating that not only has there been no slowdown in demand, but activity should accelerate in the months to come. Firms are gearing up for that as their hiring is increasing. We saw that in the payrolls number. This bodes well for job gains going forward. But this was not a uniformly strong report. Business activity eased and backlogs grew more slowly, so we may not be seeing a rapid pick up in activity.
Also lost in the employment report was the weekly jobless numbers. Claims inched upward but the level is still consistent with payroll increases in the 225,000 to 250,000 range. I suspect we will stay at that job gain pace during the summer and accelerate in the fall and winter.
MARKETS AND FED POLICY IMPLICATIONS:  It was a good day for economic numbers. The economy is indeed as strong as I have been arguing but not as strong as we want. But that time is coming and sooner rather than later. The equity markets should be focusing on the better growth not the coming jump in interest rates, but rationality and efficiency are two vastly different things. Markets are efficient, not necessarily rational. That said, we have been sent into the July 4th weekend with lots of things to celebrate, so let me end by simply saying:
Have a Great July 4th Weekend!