The closely watched Non-Farm payrolls
report in the US on Friday came in well short of what would have been a good
outcome – 126k new jobs as opposed to the +200k which is regarded as required
to maintain the momentum that has been established for some time now, and which
had motivated most market watchers to expect a rise in core interest rates
around the middle of this year.
The figures announced by the Bureau
of Labor Statistics are more nuanced than that, however. For one thing, this is
only one data point, while the Federal Reserve will be concerned with the trend,
taking into account a whole range of readings over time. For another, average hourly earnings
(month-on-month) showed a significant rise, from 0.1% to 0.3%. The lower job
growth figure, taken in the context of a higher wage readout, could indicate
that, at 5.5% (unchanged since last month), the unemployment rate has gone as
low as it can go. There is nowhere in the free world where the unemployment rate
has reached zero. Are we, in fact, looking at what is effectively full employment
in the US, or something close to it?
Aussie
rate cut confusion
The Reserve bank of Australia meets
in the early morning GMT time tomorrow to decide whether or not to cut core
interest rates. While, not so long ago, the market was expecting that a rate
cut was a virtual certainty (Ausse
rate cuts a ‘virtual certaintly’), now it is not so sure. While a cut of
0.25 percentage points has been priced in to the Aussie dollar exchange rate
against its major counterparts, a survey of economists carried out by Bloomberg
has determined that a cut will not now, after all, be announced.
In the meantime the importance of
Iron Ore to the Australian economy has been underlined by the news that exports
from Oz, most of which are made up of the raw material for steel production,
have been declining for the past 10 months. The price of Iron Ore has been
steadily collapsing in the face of significantly reduced demand from China and
a steadfast refusal by the larger Iron Ore miners to place any limits on
production.
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