Jobs Weakness Unlikely To Force Fed’s Hand
With the US financial markets closed on Friday for Independence Day, the always closely-watched monthly employment situation report was released this morning, a day earlier than its normal first-Friday-of-the-month slot.
By Peter Martin
Thursday, July 2, 2015
The data was a little softer than expected, though still points to a robust jobs market.
Non-farm payrolls grew by 223,000 in June, just below the consensus estimate of 230,000, while there were significant downward revisions to the previous two months. May was amended to 254,000 from the 280,000 that was reported last month and April was slashed to 187,000 from 221,000, for a combined downward revision of 60,000 jobs.
Furthermore, the signs of job-market tightening that we saw for May in terms of wage increases, were not present in June: average hourly earnings were unchanged, while May’s +0.3% was revised down to +0.2%.
Though the unemployment rate dropped to a lower-than-expected 5.3%, at least part of this can be attributed to a decline in the participation rate, which sunk to 62.6% from 62.9% in the month prior.
Jobless claims were also a little on the disappointing side, jumping 10,000 to 281,000. Admittedly, this rise comes from a very low level and remains well below the 300,000 level that is generally considered to correspond to improvement in the labor market. The four-week moving average nudged up to 274,750 from the prior week’s level of 273,750.
The numbers are soft enough to give the Fed pause for thought when it comes to raising rates, but healthy enough to avoid sparking worries about the state of the recovery — in other words, a fairly market-friendly state of affairs.
Indeed, stocks have begun in positive territory on Wall Street this morning, and shortly after the opening in New York, the Dow Jones was up 64 points or 0.36% at 17,822, while the S&P 500 Index gained 0.23% to stand at 2082.0.
In the forex market, the euro gained 0.28% against the dollar to 1.1086, suggesting there is no panic as yet in the market ahead of Sunday’s Greek referendum on bailout terms, the outcome of which could possibly determine the country’s future as part of monetary union with the rest of the eurozone. Yanis Varoufakis, Greece’s finance minister, has said he will resign should the referendum yield a ‘yes’ vote to the bailout terms, while Eurogroup president Jeroen Dijsselbloem said new bailout terms could only be discussed once the outcome of the plebiscite was known, effectively refusing to consider yesterday’s fresh proposals from Greek Prime Minister Alexis Tsipras.
Mr Djisselbloem suggested a deal could still be struck should the Greek people deliver a ‘yes’ vote. ‘If the outcome is positive, then there is naturally, on the European side, the willingness to help Greece out of the gutter,’ he said, but warned things would be ‘a lot more complicated’ should the vote go the other way. Because of its international nature, the forex market will be open tomorrow, though volumes may be thinner than normal in the afternoon because of the Independence Day holiday. Combined with the increased anxiety heading into the weekend’s referendum, there is, therefore, a chance of higher volatility.
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