Today
is a Federal Holiday (Labor Day) in the US, which means that many institutional
traders will not be at their desks. This can result in a thin market and
choppy, difficult-to-predict trading conditions.
Last Friday’s Non-Farm Payrolls
report showed that a smaller number of people were hired during the month of
August than had been predicted by the majority of economists who attempt to
anticipate these things. At 173k new jobs, the headline figure was well below
the 215k that had been expected. Anything below 200k is regarded as a
sub-optimal performance. Interestingly, the outcome from the private payrolls
company, ADP, which came out last Thursday, was also below 200k, at 190,000.
These two do not always match as well as this.
In the moments following the release
of the official government figures, the US dollar seemed to be taking a hit, as
there was a reflex reaction to the numbers in the belief that they would
militate against a raising of core interest rates by the Fed when its Federal
Open Market Committee (FOMC) meets next week.
But
key metrics are on the up-and-up
In cases like this, it is important
to note that the raw number for jobs in any one month represents just one data
point, and it is the overall trend that matters from the point of view of
policy makers. In addition, there are other, even more important, measures of
the health, or otherwise, of the US labour market. They include Average Hourly
Earnings, both month-on-month and year-on-year; the Labour Force Participation
Rate (always very closely watched by the Fed); Average Weekly Hours worked and;
most important of all, the Unemployment Rate. This last fell from 5.3%
previously to 5.1% on this reading, as against 5.2% expected.
On Friday, each and every one of
those measures was shown to be going in a direction that would indicate a strengthening
US economy. Whatever about the actual decision that is made regarding rates by
Janet Yellen and her colleagues next week, the results released on Friday are
not calculated to damage expectations for the start of an interest rate raising
cycle in the US in the very near future.
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