US jobs signal possible Fed move this year

A very strong set of non-farm payrolls numbers from the US overnight has reignited thoughts of a hike in rates from the Fed as early as Sept this year; and that has seen the US$ rally (the A$ lost almost a cent on the data release and now stands at just over US$0.76). May saw a total of 280,000 new jobs added against expectations that centred around 225,000. In addition the data for March and April were revised higher to add another 32,000 to the original estimates. Despite the strong jobs numbers a rise in the Participation Rate saw the headline unemployment rate actually tick slightly higher to 5.5%.

Concerns that the US economic recovery might have been stalling following the release of Q1 GDP data showed a slowdown have been allayed by these stronger jobs numbers. As a result the market is now reconsidering the previous assumption that the Fed might not move on rates until 2016. There is now talk of the first move up as soon as the September Fed meeting.

US jobs strong again

The US jobs data for November has, once again, beaten expectations. Non-farm payrolls increased by 321,000. The markets had been expecting an increase of around 230,000. In addition, estimates for Sept and Oct were revised higher by a combined 44,000.

A separate survey showed the headline unemployment rate unchanged at 5.8%.

US unemployment falls to 5.8%

Data released overnight shows that the US labour market continued to improve in October. A total of 214,000 new jobs were added to the non-farm payrolls and, in a separate survey, the unemployment rate fell to 5.8% (from 5.9%).

Although the jobs number was somewhat lower than the market had been expecting that disappointment was offset by upward revisions totaling 31,000 to the past 2 months and the fact that the Participation Rate nudged higher (to 62.8 from 62.7). Although earnings were also up the rate of increase remains modest; average earnings now sit 2% higher than they were a year ago, only slightly above the current rate of inflation (+1.7%).

US grows at 3.5% annualised in Q3

Data released overnight in the US showed GDP growth at an annualised 3.5% in the September quarter (this compares with +4.6% ann in Q2 and -2.1% ann in Q1). Over the course of the past 12 months the US economy has expanded a real 2.3%. The result was somewhat stronger than the consensus market expectations.

Growth came from household spending (the largest component of GDP) which was up 1.8% ann, business investment +5.5% ann and government spending +4.6% ann. The housing sector slowed from the previous quarter +1.8% ann (after a 8.8% annualised growth in Q2).

The US$ rallied strongly on the data (up over a cent against the A$) but has since lost almost half of those gains. The A$ is currently trading around US$0.884.

Fed confirm the end of QE3

As had been widely anticipated, the Fed have announced the ending of their bond-buying program (known as QE3) in the statement at the end of the 2 day FOMC meeting.

While the announcement came as no surprise the general tone of the announcement from the FOMC has been seen as somewhat more optimistic on the US economy than previously. As a result attention has once again shifted to the possibility of a move up in rates in the US earlier than the mid-2015 time frame which had been broadly expected. There is still plenty of caution from the Fed (they are still using the phrase “considerable time” when discussing how long the Fed Funds rate will stay st record lows), but the slightly more up-beat tone saw the US$ rally strongly and the equity market weaken (although it closed only a little down after a bigger decline on the statement release).

US jobs sends A$ lower

The release overnight of the US jobs report for September has seen the A$ fall almost a full US cent. The non-farm payrolls for Sept saw a strong increase of 248,000 (above expectations) combined with large upward revisions to the data for July and August (combined revisions added another 69,000). The unemployment rate in the US has now fallen to a 6 year low of 5.9% (from 6.1% in August).

Dampening the news somewhat was the fact that the Participation Rate once again fell, this time to 62.7 (from 62.8). To put this figure in some context we need to bear in mind that participation in the US in the years pre-GFC was running at about 66. This was a similar level to here in Australia at that time. The large decline in US participation has greatly assisted in pushing the unemployment rate down, while in Australia participation, although slightly weaker than pre-GFC, has fallen nowhere near as far and as a result we have seen our unemployment rate rise (currently at 6.1%). Those contrasting a sub-6% unemployment rate in the US with our own situation need to to bear that (significant) difference in mind.

News of the strong jobs data boosted talk of a rate hike in the US sooner rather than later and, as a result, the US$ rallied strongly. The A$ fell by almost a full US cent and is presently trading around US$0.867

US Q2 GDP revised higher

Overnight we saw second quarter GDP in the US revised up to an annualised +4.2%, from an initial +4.0%. The revision came on the back of stronger investment numbers and slightly weaker inventories. The weaker inventory number could point towards a stronger Q3 result as companies are required to restock.

After the weak Q1 result (-2.1% ann) the result for the first half of the year is a just +1.1% ann but expectations are for growth to be around 3% ann in the latter half of the year.

US Jobs growth steady but unemployment rate ticks higher

Data released overnight shows the US jobs market continuing to perform steadily (if less spectacularly than had been expected). Non-farm payrolls grew by 209,000 in July. Payrolls for both May and June were also revised up by a total of 15,000. The monthly average over the past 6 months now sits above 200,000.

Despite the increase in jobs a move up in the Participation Rate to 62.9 (from 62.8) saw the headline unemployment rate tick higher to 6.2% (from 6.1% in June).

The graphic below from the Wall Street Journal details some of the data.

WSJ

Fed taper continues as US growth picks up

Overnight the Fed have announced that their tapering of bond buying will continue, with another $10bn per month knocked off the plans. The Fed will now be buying just $25bn per month with the policy set to come to an end (as planned) in October. The announcement was no surprise to the markets.

In other news the US economy was shown to have grown more strongly than expected in the second quarter. Annualised GDP growth in Q2 came in at 4% while the decline in Q1 was revised from a fall of 2.9% to 2.1%. The dip in Q1 was clearly related to the shocking winter weather experienced in the US but the strength of the Q2 numbers show that the (slow) recovery in the US remains on track. For the first 6 months of the year the US economy has grown at about a 1% annualised pace.

The news from the US has seen the A$ trade slightly lower overnight at currently sits at US$0.933.

US jobs continue to improve

Data out overnight has shown the US labour market continuing to improve. Non-farm payrolls increased by 288,000 in June (far better than had been expected). Data for April and May was also revised higher with an additional 29,000 added to the two months. With participation remaining fairly static at 62.8 the headline unemployment rate has now fallen to 6.1% (from 6.3% in May). This is the lowest it has been since the collapse of Lehman Bros back in Sept 2008.
To be sure, it’s not all sweetness and light in the US jobs market. Participation remains historically low and average hourly wages have risen only 2% in the past year, barely keeping pace with inflation. Most of the new jobs have been in lower paid retail and hospitality sectors with the higher paid sectors lagging behind.

Nevertheless, the markets have been buoyed by the strength with the Dow Jones index up 0.5% on the day to close above 17,000 for the first time.  The news saw the US$ strengthen against the A$ (continuing the trend started yesterday); the Aussie is currently trading at a shade under US 93.5 cents.