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220 matches for " unemployment rate":
The Japanese unemployment rate fell again in September, to 2.3% from 2.4%. In the same vein, the job-to-applicant ratio rose to 1.64, from 1.63.
Chile's unadjusted unemployment rate fell to 7.1% in July-to-September, from 7.3% in June-to-August, but it was up from 6.7% in September last year.
In principle, predicting the interest rate policies of an inflation-targeting central bank should be simple. Our first chart shows a standard Taylor Rule rate for the Eurozone based on the ECB's inflation target of 2%, the long-run average unemployment rate and a long run "equilibrium interest rate" of 1.5%. This framework historically has been a decent guide to ECB policy.
At their March meeting FOMC members' range of forecasts for the unemployment rate in the fourth quarter of this year ranged from 4.4% to 4.7%, with a median of 4.5%. But Friday's report showed that the unemployment rate hit the bottom of the forecast range in April.
Focus on Japan's job-to-applicant ratio, not the unemployment rate
We have argued consistently for some time that the next year will bring a clear acceleration in U.S. wage growth, because the unemployment rate has fallen below the Nairu and a host of business survey indicators point to clear upward wage pressures. Nominal wage growth has been constrained, in our view, by the unexpected decline in core inflation from 2012 through early 2015, which boosted real wage growth and, hence, eased the pressure from employees for bigger nominal raises.
Today's labour market data look set to show that the headline, three-month average, unemployment rate held steady at just 5% in May, unchanged from April's reading.
Data to be released this Friday should show that Japan's labour market remains tight, though the unemployment rate likely ticked back up in February, to 2.6%, after the erratic drop to 2.4% in January.
Yesterday's October labour market data in Mexico showed that the adjusted unemployment rate rose a bit to 3.4%, from 3.3% in September.
The unemployment rate hit its post-1970 low in April 2000, at the peak of the first internet boom, when it nudged down to just 3.8%. The low in the next cycle, first reached in October 2006, was rather higher, at 4.4%.
The stand-out development in yesterday's labour market report was the drop in the he adline, three-month average, unemployment rate to just 4.0% in June--its lowest rate since February 1975--from 4.2% in May.
The labour market in Germany tightened further at the end of last year. The headline unemployment rate--unemployment claims as a share of the labour force--fell to 5.5% in December, from 5.6% in November, driven by a 29K plunge in claims.
Yesterday's labour market data significantly bolster the consensus view on the MPC that interest rates do not need to rise this year to counter the imminent burst of inflation. Granted, the headline, three-month average, unemployment rate fell to 4.7% in January--its lowest rate since August 1975--from 4.8% in December, defying the consensus forecast for no-change.
A cursory glance at July's labour market report gives no cause for alarm. The headline, three-month average, unemployment rate returned to 3.8% in July, after edging up to 3.9% in June.
Korea's unemployment rate tumbled to 3.7% in February, after the leap to 4.4% in January.
Yesterday's labour market data gave sterling a shot in the arm on t wo counts. First, the headline, three-month average, unemployment rate fell to just 4.5% in May, from 4.6% in April.
It's very tempting to look at the upturn in the participation rate in recent months and extrapolate it into a sustained upward trend. If the trend were to rise quickly enough, it conceivably could prevent any further fall in the unemployment rate, preventing it falling below the bottom of the Fed's estimated Nairu range.
The falling unemployment rate and the threat it poses to the inflation outlook mean that the labor market numbers in the NFIB small business survey attract more attention than the other data in the report.
The Monetary Policy Committee continues to assert that it can leave interest rates at rock-bottom levels, even though the unemployment rate has returned to its pre-recession level, because it understates the extent of slack in the labour market. If that hypothesis were correct, however, the relationship between the unemployment rate and wage growth would have weakened. But this clearly has not happened, as our first chart shows.
Last week's national accounts confirmed that the economy lost momentum abruptly in Q1, with net trade and investment failing to offset weaker growth in households' spending.
Japan's flash Nikkei manufacturing PMI report for November was abysmal, putting the chances of a recovery this quarter into serious doubt.
The end of the government shutdown--for three weeks, at least-- means that the data backlog will start to clear this week.
We were happy to see upside surprises from both sides of the domestic economy yesterday, but we doubt that the August readings from both the Conference Board's consumer confidence survey and the Richmond Fed business survey can hold.
The absence of hawkish undertones in the minutes of the MPC's meeting or in the Inflation Report forecasts took markets by surprise yesterday. The dominant view on the Committee remains that the economy will slow over the next couple of years, preventing wage growth from reaching a pace which would put inflation on trac k permanently to exceed the 2% target.
Data released last week confirm that Brazil's recovery has continued over the second half of the year, supported by steady household consumption and rebounding capex.
China's Caixin manufacturing PMI doused hopes of turning over a January new leaf; it dropped to 49.7 in November, from 50.2 in December.
Economic data released on Friday underscored our view that bolder rate cuts in Brazil are looming. The BCB's latest BCB's inflation report, released on Thursday, showed that policymakers now see conditions in place to increase the pace of easing "moderately" .
The definition of "yesbutism": Noun, meaning the practice of dismissing or seeking to diminish the importance of data on the grounds that the next iteration will tell the opposite story.
Inflation in Mexico remains relatively sticky, limiting Banxico's capacity to adopt a more dovish approach, despite the subpar economic recovery.
Yesterday's data don't significantly change our view that first quarter GDP growth will be reported at only about 1%, but the foreign trade and consumer confidence numbers support our contention that the underlying trend in growth is rather stronger than that.
Concern over individual freedoms was the spark for Hong Kong's recent demonstrations and troubles, and protesters' demands continue to be political in nature.
We have argued for some time that the revival in nonoil capex represents clear upside risk for GDP growth next year, but it's now time to make this our base case.
Our forecast that CPI inflation will shoot up to about 3% in the second half of 2017, from 0.6% last month, assumes that pass-through from the exchange rate to consumer goods prices will be as swift and complete as in the past. Our first chart shows that this relationship has held firm recently, with core goods prices falling at the rate implied by sterling's appreciation in 2014 and 2015.
Mexican policymakers voted to leave the main rate on hold at 8.25% yesterday, as inflation remains high--though falling--and the economy is stuttering.
The latest E.C. survey shows the gap between firms' and households' confidence levels has remained substantial.
It doesn'tt matter if third quarter GDP growth is revised up a couple of tenths in today's third estimate of the data, in line with the consensus forecast.
Industrial profits growth is closely watched by the Chinese authorities, even more so now that deleveraging is a prime policy aim.
Markets will be hyper-sensitive to U.K. data releases following the MPC's warning that it is on the verge of raising interest rates.
Brazil's monetary policy committee, the Copom, cut the Selic rate by 25bp to 14.0% in a unanimous decision, without bias, on Wednesday. This marks the start of the first easing cycle since 2012, and it arrives after 15 months with rates held at 14.25%.
Expectations for a March rate hike have dipped since Fed Vice-Chair Clarida's CNBC interview last Friday.
The Prime Minister has revealed that her Plan B for Brexit is to get Eurosceptics within the Tory party on side in an attempt to show the E.U. that a deal could be done if the backstop for Northern Ireland was amended. Her plan is highly likely to fail, again.
On a trade-weighted basis, sterling has dropped by only 1.5% since the start of the month, but it is easy to envisage circumstances in which it would fall significantly further.
We expect the Mexican economy to continue growing close to 2% year-over-year in 2019, driven mainly by consumption, but constrained by weak investment, due to prolonged uncertainty related to trade.
The White House budget proposals, which Roll Call says will be released in limited form on March 14, will include forecasts of sustained real GDP growth in a 3-to-3.5% range, according to an array of recent press reports.
February's consumer price figures give the MPC reason to doubt the case for raising interest rates again as soon as May.
Fed Chair Yellen said something which sounded odd, at first, in her Q&A at the Senate Banking Committee last Tuesday. It is "not clear" she argued, that the rate of growth of wages has a "direct impact on inflation".
Brazil's central bank kept the Selic policy rate at 6.50% this week, as markets broadly expected.
We expect the BoK to hike this month, believing that it's necessary to curtail household debt growth now, in order to prevent a sharper economic slowdown as the Fed hiking cycle continues, China slows, and trade risks unfold.
Don't bet the farm on today's October payroll numbers, which will be hopelessly--and unpredictably-- compromised by the impact of hurricanes Florence and Michael.
Signs of a slowdown in the labour market data are conspicuously absent.
The passage of the House tax cut bill does not guarantee that the Senate will follow suit with its own bill, still less that both chambers will then be able to agree on a single bill which can then b e signed into law. As
The gap between U.K. and U.S. government bond yields has continued to grow this year and is approaching a record.
One of the arguments we hear in favor of an endless Fed pause--in other words, the cyclical tightening is over--is that GDP growth is set to slow markedly this year, to only 2% or so.
Japan's Q2 Tankan survey wasn't all bad news, but the positives won't last long. The large manufacturers index dropped to 7 in Q2, after the decline to 12 in Q1.
Meetings are a nice way to stress test our base case stories and gauge what questions are important for clients.
It would be astonishing if the Fed doesn't raise rates today, and Chair Powell is not in the astonishment business; they will hike by 25bp.
Japanese services price inflation edged down in May as the twin upside drivers of commodity price inflation and yen weakness began to lose steam. We expect wage costs to begin edging up in the second half but this will provide only a partial counterbalance.
Whichever way you choose to slice the numbers, consumers' spending is growing much more slowly than is implied by an array of confidence surveys.
Politics in Brazil has been busy in recent days, with local media reporting several items of interest.
This was supposed to be the year that wage growth finally would pick up and signal clearly to the MPC that the economy needs higher interest rates.
Mexico's retail sector is finally improving, following a grim second half last year.
Our base case remains that the slowdown in quarter-on-quarter GDP growth to about zero in Q2 is just a blip, and that the economy will regain momentum in Q3 and sustain it well into 2020.
In Brazil, last week's formal payroll employment report for March was decent, with employment increasing by 56K, well above the consensus expectation for a 48K gain.
Broadly speaking, yesterday's headline EZ survey data recounted the same story they've told all year; namely that manufacturing is suffering amid resilience in services.
We are fundamentally quite bullish on the housing market, given the 100bp drop in mortgage rates over the past six months and the continued strength of the labor market, but today's May new home sales report likely will be unexciting.
Since the Party Congress last month, China has made a number of bold moves in multiple policy fields, with a regularity that almost implies the authorities are working through a list.
Japanese retail sales were unchanged in October month-on-month, after a 0.8% rise in September.
It would be astonishing if the May and June payroll numbers looked much like April's strong data, at least in the private sector.
We're nudging up our forecast for today's August payroll number to 180K, in the wake of the ADP report.
...The Fed did nothing, surprising no-one; the labor market tightened further; the housing market tracked sideways; survey data mostly slipped a bit; and oil prices jumped nearly $4, briefly nudging above $50 for the first time since May.
We're sticking to our 220K forecast for today's official payroll number, despite the slightly smaller-than- expected 179K increase in the ADP measure of private employment.
Chile's Imacec index confirmed that economic growth ended the year on a soft note, due mainly to weakness in the mining sector.
The ADP measure of private employment hugely overstated the official measure of payrolls in September, in the wake of Hurricane Irma, but then slightly understated the October number.
Labor demand, as measured by an array of business surveys, clearly slowed from the cycle peak, recorded late last year.
We had hoped that the statistical problems which have plagued the initial estimates of August payrolls in recent years had faded, but Friday's report suggests our judgement was premature.
We are not worried, at all, by the slowdown in headline payroll growth to 157K in July from an upwardly-revised 248K in June.
The MPC's view that the economy likely will grow at an above-trend rate over the coming quarters was challenged immediately last week by the PMIs.
Japan's average year-over-year wage growth slowed sharply in May, but this mainly was a correction of the April spike.
In the wake of Wednesday's ADP report, showing a mere 27K increase in private payrolls, we cut our payroll forecast to 100K.
China's official manufacturing PMI slipped in June, but the overall picture for Q2 is sound despite the uncertainty posed by rising trade tensions with the U.S.
We'd be quite surprised if the headline payroll number today turned out to be far from the consensus, 205K, or our forecast, 225K.
We expect August's GDP figures, released on Wednesday, to show that month-to-month growth slowed to 0.1%, from 0.3% in July.
The dip in payroll growth in September was due to Hurricane Florence. We expect a clear rebound in payrolls in October; our tentative forecast is 250K.
Our below-consensus 125K forecast for today's February payroll number is predicated on two ideas.
A casual glance at our char t below, which shows the number of job openings from the JOLTS report, seems to fit our story that the slowdown in payrolls in April and May--perhaps triggered by the drop in stocks in January and February--will prove temporary. Job openings dipped, but have recovered and now stand very close to their cycle high.
No single measure of labor demand is always a reliable leading indicator of the official payroll numbers, which is why we track an array of private and official measures.
The flow of data pointing to strength in the labor market has continued this week, on the heels of last week's report of a 250K jump in October payrolls.
The NFIB survey of small businesses today will show that July hiring intentions jumped by four points to +19, the highest level since November 2006. The NFIB survey has been running since 1973, and the hiring intentions index has never been sustained above 20.
We expect to see a 180K increase in November payrolls
If the underlying trend in payroll growth is about 200K, then a weather-depressed 98K reading needs to be followed by a rebound of about 300K in order fully to reverse the hit. But the consensus for today's April number is only 190K, and our forecast is 225K.
Fed Chair Powell yesterday said about as little as he could without appearing to ignore the turmoil in markets since the President announced his intention to apply tariffs to imports from Mexico: "We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective."
Markets expect the Fed will fail to follow through on its current intention to raise rates twice more this year and three times next year. Part of this skepticism reflects recent experience.
The trade war with China is not big enough or bad enough alone to push the U.S. economy into recession.
Yesterday's economic data in the Eurozone were soft.
We have witnessed a dramatic shift in just a few weeks in perceptions of Mexico as an investment destination.
We have argued recently that the year-over-year rates of core CPI and core PCE inflation could cross over the next year, with core PCE rising more quickly for the first time since 2010.
Economic data in Mexico continue to come in strong.
Inflation and growth paths remain diverse across LatAm, but in the Andes, the broad picture is one of modest inflationary pressures and gradual economic recovery.
Markets were surprised yesterday by the absence of hawkish comments or guidance accompanying the MPC's decision to raise interest rates to 0.50%, from 0.25%.
China's official PMIs were little changed in August, with the manufacturing gauge up trivially to 51.3, from 51.2 in July and the non-manufacturing gauge up to 54.2, from 54.0.
We're expecting a hefty increase in private payrolls in today's August ADP employment report. ADP's number is generated by a model which incorporates macroeconomic statistics and lagged official payroll data, as well as information collected from firms which use ADP's payroll processing services.
The jobless rate fell back to 2.8% in June after the surprise rise to 3.1% in May. This drop takes us back to where we were in April before voluntary unemployment jumped in May.
Yesterday's data kicked off the release of Eurozone Q3 growth numbers with a robust Spanish headline. Real GDP in Spain rose 0.8% quarter-on-quarter, slowing slightly from 0.9% in Q2, and le aving the year-over-year rate unchanged at 3.1%.
April payroll growth likely will be reported at close to 200K. Overall, the survey evidence points to a stronger performance, but they don't take account of weather effects, and April was a bit colder and snowier than usual. We're not expecting a big weather hit, but some impact seems a reasonable bet.
Activity data from Colombia over the past quarter have been strong. Real GDP expanded by a relatively robust 2.8% year-over-year in Q2, and is on track to post a 3.2% increase in Q3.
In the wake of yesterday's ADP report, which showed private payrolls up 250K in December, we have revised our forecast for today's official headline number up to 240K from 210K.
We don't believe that payrolls rose only 138K in May. History strongly suggests that when the May payroll survey is conducted relatively early in the month, payroll growth falls short of the prior trend.
Japan's jobless rate inched up to 2.5% in January, from 2.4% in December.
The May employment report was somewhat overshadowed by the furor over the president's tweet, at 7.15AM, hinting--more than hinting--that the numbers would be good.
Today's October ADP measure of private payrolls likely will overshoot Friday's official number.
It's not our job to pontificate on the merits, or otherwise, of the tax cut bill from a political perspective.
The Caixin manufacturing PMI for January was grim, indicating that China's start to the year wasn't as benign as the official surveys suggested.
Today's ADP employment report for December ought to show private payrolls continue to rise at a very solid pace
Gilts continued to rally last week, with 10-year yields dropping to their lowest since October 2016, and the gap between two-year and 10-year yields narrowing to the smallest margin since September 2008.
An inverted curve is a widely recognised signal that a recession is around the corner, though it's worth remembering that the lags tend to be long.
Mexico's economy is not accelerating, but it is holding up very well in difficult circumstances, with rising domestic political risk and stifling interest rates.
The sudden jump in the headline, three-month average, growth rate of average weekly wages to a 10-year high of 3.3% in October, from just 2.4% four months earlier, might indicate that the U.K. has reached the sharply upward-sloping part of the Phillips Curve.
Today's JOLTS survey covers August, which seems like a long time ago. But the report is worth your attention nonetheless.
China's trade surplus has been trending down in the last two years.
First things first: Payroll growth likely will be sustained at or close to November's pace.
Momentum in French manufacturing eased slightly in November, but the setback was modest. Industrial production dipped 0.5% month-to-month, only partially reversing the revised 1.7% jump in October.
Mark Carney emphasised in his Mansion House speech last month that he wants wage growth to "begin to firm" from recent "anaemic" rates before voting to raise interest rates.
Chair Yellen has become quite good at not giving much away at her semi-annual Monetary Policy Testimony.
Yesterday's labour market data showed that growth in households' income has slowed significantly in recent months. Firms are both hiring cautiously and restraining wage increases, due to heightened uncertainty about the economic outlook and rising raw material and non-wage labour costs. Consumers' spending, therefore, will support GDP growth to a far smaller extent this year than last.
China's October activity data showed signs of the infrastructure stimulus machine sputtering into life. Consensus expectations appear to hold out for a continuation into November, but we think the numbers will be disappointing.
Today's FOMC minutes will add flesh to the bones of the three dissents on September 21. The FOMC statement merely said that each of the three--Loretta Mester, Esther George and Eric Rosengren--preferred to raise rates by a quarter-point.
Our forecast for a 0.3% increase in the September core PPI, slightly above the underlying trend, is even more tentative than usual.
The case for continuing to increase Bank Rate gradually--recently reiterated by MPC members Andy Haldane and Michael Saunders-- strengthened yesterday with the release of April's labour market report, which revealed renewed momentum in wage growth.
Inflation pressures in Brazil are now well- contained, with the headline rate falling to a decade low in July. We think inflation is now close to bottoming out, but the current benign rate strengthens our base case forecast for a 100bp rate cut at the next policy meeting, in September.
Nowhere is the gap between sentiment and activity wider than in the NFIB survey of small businesses. The economic expectations component leaped by an astonishing 57 points between October and December, but the capex intentions index rose by only two points over the same period, and it has since slipped back. In February, the capex intentions index stood at 26, compared to an average of 27.3 in the three months to October.
The economy slowed less than we expected in 2017.
The latest official data show that net migration to the U.K. hasn't fallen much, despite all the uncertainty created by the Brexit vote.
We have few doubts that labor demand remained strong in January, but the chance of a repeat of December's 312K payroll gain is slim.
Yesterday's first estimate of full-year 2016 GDP in Mexico indicates that growth gathered momentum over the second half of last year. But risks are now tilted to the downside, following the U.S. election. GDP rose 0.6% quarter-on-quarter in Q4, after a 1.0% increase in Q3. Growth was much slower in the firs t half, as shown in our char t below.
Chile's central bank left its policy rate on hold last Friday at 3.0%, in line with market expectations, amid easing inflationary pressures and a struggling economy.
A firmer picture is emerging of how Japan's economy fared in Q3, in light of the latest slew of data for August.
Slowly but surely, it is becoming respectable to argue that central bank policy in the developed world is part of the problem of slow growth, not the solution. We have worried for some time that the signal sent by ZIRP--that the economy is in terrible shape--is more than offsetting the cash-flow gains to borrowers.
Neither the 33K drop in September payrolls nor the 0.5% jump in hourly earnings tells us anything about the underlying state of the labor market.
Lacklustre economic data and persistent no deal Brexit risk mean that the MPC won't rock the boat at this week's meeting.
We're expecting a hefty increase in February payrolls today, but even a surprise weak number likely wouldn't prevent a rate hike next week. The trends in all the private sector employment surveys are strong and improving, and jobless claims have dropped to new lows too, though we think that's probably less important than it appears.
Payroll growth has slowed, no matter how you slice and dice the numbers.
The softening in payroll growth in November appears mostly to be a story about short-term noise, rather than a sign that tariffs are hurting or that the broader economy is slowing.
Jim Bullard, the St. Louis Fed president, said last week that Phillips Curve effects in the U.S. are "weak", and that nominal wage growth is not a good predictor of future inflation.
Recent economic weakness in Brazil, particularly in domestic demand, and the ongoing deterioration of confidence indicators, have strengthened the case for interest rate cuts.
Yesterday's economic activity data from Peru signalled that the relatively firm business cycle continues. The monthly GDP index accelerated to 3.6% year-over-year in November, rising from 2.1% in October, but marginally below the 4.4% on average in Q3. Growth continued to be driven by mining output, including oil and gas, which rose 15% year-over- year. The opening of several new mines explains the upturn, and we expect the sector to remain key for the Peruvian economy this year.
The most eye-catching aspect of December's consumer prices report was the pick-up in core inflation to 1.9%, from 1.8% in November, above the no-change consensus.
Today's labour market figures look set to show that wage growth has continued to slow, fuelling speculation that interest rates are going nowhere soon. But a close examination of why wage growth has weakened suggests investors will be surprised by a robust rebound later this year.
Consensus expectations for August's labour market data, released today, look well grounded.
Yesterday's data in the EZ provided a little more evidence on what happened in Q1.
Data released over the weekend confirm that the Peruvian economy enjoyed a strong second quarter. The economic activity index rose 6.4% year-over-year in May, well above market expectations, and up from 3.2% in Q1.
The long-awaited decisive upturn in wage growth still hasn't emerged. Year-over-year growth in average weekly wages, excluding bonuses, held steady at 2.6% in May.
Brazil's December industrial production and labour reports, released this week, confirmed that the recovery remained solidly on track at the end of last year.
Chair Yellen broke no new ground in her Testimony yesterday, repeating her long-standing view that the tightening labor market requires the Fed to continue normalizing policy at a gradual pace.
The FOMC did nothing yesterday and said nothing significantly different from its June statement, as was universally expected.
The probability of a rate hike on June 14, as implied by the fed funds future, has dropped to 90%, from a peak of 99% on May 5.
Yesterday's labour market figures revealed that employment growth has picked up this year, despite the shadow cast over the medium-term economic outlook by Brexit. The 122K, or 0.4%, quarter-on-quarter rise in employment in Q1 was the biggest since Q2 2016.
Official industrial production growth in China plunged to 5.4% year-over-year in April, from 8.5% in March.
From a bird's-eye perspective, the argument for continued steady Fed rate hikes is clear.
We remain confident--see here--that today's Q3 GDP report in Germany will be a shocker, but this already is priced-in by markets.
September's labour market report suggests that wage growth won't continue to rise for much longer.
With rates now certain to rise this week, the real importance of the employment picture is what it says about the timing of the next hike. To be clear, we think the Fed will raise rates again in June, and will at that meeting add another dot to the plot, making four hikes this year.
Korea's jobs report for August was a stonker, with unemployment plunging to 3.1%, from 4.0% in July, marking the lowest rate in more than five years.
Governor Kuroda dropped further hints in speeches earlier this week that interest rates will be going up. He discussed methods of exit, in loose terms.
Following this week's 25bp Fed hike, the PBoC hiked the main interest rates in its corridor by... 5bp. The move was unexpected so the RMB strengthened modestly; commentary is full of how this means the deleveraging drive is serious.
The Fed was more hawkish than we expected yesterday.
The EZ Q4 GDP data narrowly avoided a downward revision in yesterday's second estimate.
China's September trade numbers show that, far from reducing the surplus with the U.S., the trade wars so far have pushed it up to a new record.
The Fed will hike by 25 basis points today, citing the tightening labor market as the key reason to press ahead with the process of policy normalization. We think the case for adding an extra dot to the plot for both this year and next is powerful.
CPI inflation held steady at 3.0% in October, undershooting our forecast and the consensus by 0.1 percentage point and the MPC's forecast by 0.2pp.
Today's MPC meeting and minutes are the first opportunity for Committee members to speak out in over a month, now that election "purdah" rules have lifted.
The economic momentum evident late last year carried into 2015, the Labor Department said Friday, with American employers adding 257,000 jobs in January as wage growth rebounded and more people joined the workforce
Chief U.S. Economist Ian Shepherdson on today's Payroll report
Today's labour market figures likely will show that the Brexit vote has inflicted only minimal damage on job prospects so far. The unemployment rate likely held steady at 4.9% in the three months to September, and the risk of a renewed fall in unemployment appears to be bigger than for a rise.
The French labour market improved much more than we expected in Q4. The headline unemployment rate plunged to 8.9%, from a downwardly-revised 9.6% in Q3.
We think the FOMC's announcement this afternoon will not include the phrase "considerable time", signaling that the first rate cut will come at or before the middle of next year. At the same time, the Fed's new forecasts likely will show the unemployment rate falling into the Fed's estimated Nairu range this year, rather than the spring of 2016, as implied by their September forecasts.
Fed Chair Yellen said nothing very new in the core of her Monetary Policy Testimony yesterday, repeating her view that rates likely will have to rise this year but policy will remain accommodative, and that the labor market is less tight than the headline unemployment rate suggests. The upturn in wage growth remains "tentative", in her view, making the next two payroll reports before the September FOMC meeting key to whether the Fed moves then.
Korea's unemployment rate fell for a second straight month in October, inching down to 3.9%, from 4.0% in September.
Everyone is familiar by now with the conundrum in the labor market: How come wage gains have barely increased over the past few years even as the unemployment rate has fallen to very low levels, and business surveys scream that employers can't find the people they want? To give just one visual example of the scale of the apparent anomaly, our first chart shows the yawning gap between the headline unemployment rate and the rate of growth of hourly earnings, compared to previous cycles.
The unemployment rate has now been at 4.1% for six straight months. This does not mean, though, that it's safe to assume it will remain there, or indeed that this level of unemployment can be sustained without eventually triggering a meaningful increase in inflation.
The 21K rise in the headline, three-month average, unemployment rate between November and February confirmed last month that the U.K.'s period of fantastically strong growth in employment has ended. Timelier indicators, however, suggest unemployment is stabilising, not on the cusp of a major increase.
The FOMC yesterday did what it had to do, and said what it had to say. The super-doves were kicked into line, with a unanimous vote, though two members' blue dots showed they think rates should not have been raised. In our view, though, Dr. Yellen's avowed intention to raise rates gradually sits uneasily with her--correct--assertion that policy remains very accommodative, bearing in mind that the unemployment rate is now at the Fed's estimate of the Nairu, while evidence of accelerating wage gains is burgeoning.
We expected a modest correction in the number of job openings in July, following the surge over the previous few months, but instead yesterday's JOLTS report revealed that openings jumped by a mind-boggling 8.1% to a new record high. In the three months to July, the number of openings soared at a 35% annualized rate. As a result, the Beveridge Curve, which compares the number of openings to the unemployment rate, is now further than ever from normalizing after shifting out decisively in 2010.
...The Fed told investors that it now requires only "some further improvement" in labor market conditions before starting to raise rates-- the "some" is new--but did not set out any specific conditions. With the unemployment rate now just a tenth above the top of the Fed's Nairu range, 5.0-to-5.2%, and very likely to dip into it by the time of the decision on September 17, while payroll growth is trending solidly above 200K per month, rates already would have been raised some time ago in previous cycles.
Japan's unemployment rate returned unexpectedly to its 26-year low of 2.3% in February, falling from 2.5% in January.
The labour market in the Eurozone continues slowly to improve. The unemployment rate fell to 10.7% in October from 10.8% in September, reaching its lowest level since 2013. The divergence in rates, however, between the major economies remains significant. Unemployment in France, Italy and Spain is still above 10%, but the advance German number continued their record-breaking form in November.
Workers in the euro area remain scarred by the zone's repeated crises, but the strengthening cyclical recovery is slowly starting to spread to the labour market. The unemployment rate fell to a three-year low of 10.9% in July, and employment has edged higher after hitting a low in the middle of 2013. Germany's outperformance is a key story, with employment increasing uninterruptedly since 2009, and the unemployment rate declining to an all-time low of 6.4%. Among the other major economies, the unemployment rate in Spain and Italy remains higher than in France. But employment in Spain has outperformed in the cyclical recovery since 2013.
The Korean unemployment rate edged back up to 3.7% in November from October's 3.6%. Young graduates--the usual suspects--accounted for most of the rise.
The Fed's action, statement, and forecasts, and Chair Yellen's press conference, made it very clear the Fed is torn between the dovish signals from the recent core inflation data, and the much more hawkish message coming from the rapid decline in the unemployment rate.
Yesterday's data were second-tier in the eyes of the markets, but not, perhaps in the eyes of the Fed. The continued surge in job openings, which reached a 14-year high in December, means that the Beveridge Curve--which links the number of job openings to the unemployment rate--shows no signs at all of returning to normal.
Korea's jobs report for January was nasty. The unemployment rate spiked to 4.4%, from 3.8% in December, marking the highest level in nine years.
Based on key economic indicators, the Eurozone economy is doing splendidly, relative to its performance in recent years. Real GDP has been growing at 1.6%-to-1.7% year-over-year since the first quarter of last year, bank credit has expanded, and the unemployment rate is declining.
Another month, another bleak Brazilian labor market report. The seasonally adjusted unemployment rate increased marginally to 8.3% in December, up from 8.2% in November, much worse than the 5.1% recorded in December 2014.
If the Fed needed further encouragement to raise rates next month, it arrived Friday in the form of solid jobs numbers, a new cycle low for the broad unemployment rate, and a new cycle high for wage growth.
If recent labor market trends continue, the four employment reports which will be released before the June FOMC meeting will show the economy creating about 1.1M jobs, pushing the unemployment rate down to 5.3%, almost at the bottom of the Fed's estimated Nairu range, 5.2-to-5.5%.
Youth unemployment remains a blemish on the Eurozone economy, despite an increasingly resilient cyclical recovery. The unemployment rate for young workers aged 15-to-24 years stood at 18.4% at the end of April, chiefly due to high joblessness in the periphery.
We're pretty sure that the unemployment rate didn't drop by 0.3 percentage points in November. We're pretty sure hourly earnings didn't fall by 0.1%. And we're pretty sure payrolls didn't rise by 178K. All the employment data are unreliable month-to-month, with the wages numbers particularly susceptible to technical quirks.
At a stroke, the October payroll report returned the short-term trend in payroll growth to the range in place since 2011, pushed the unemployment rate into the lower part of the Fed's Nairu range, and lifted the year-over-year rate of growth of hourly earnings to a six-year high. The FOMC has never quantitatively defined what it means by "some further improvement in the labor market", its condition for increasing rates, but if the October report does not qualify, it's hard to know what might fit the bill. We expect a 25bp increase in December.
We read after the employment report that the drop in the unemployment rate was somehow not significant, because it was due in p art to a reported 41K drop in the size of the labor force, completing a 404K cumulative contraction over the three months to August. In our view, though, analysts need to take a broader approach to the picture painted by the household survey, which is much more volatile and less reliable than the payroll survey over short periods.
Data yesterday showed that the downward trend in Eurozone unemployment continued towards the end of last year. The unemployment rate fell to 10.4% in December from 10.5% in November, extending an almost uninterrupted decline which began in the first quarter of 2013.
BoJ snubs the doves. Japan's unemployment rate downtick was minimal. The weak external backdrop dominates Japan's pre-tax front-loading industrial activity.
Japan's stable unemployment rate belies underlying weakness. Tokyo energy inflation turns the corner. Sales tax preparations breathe life into Japanese production in May... if only temporarily. Korea's IP plunge in May shows why Japan can't rest on its laurels.
Japan's unemployment rate edged back up to 2.5% in February after the drop in January to 2.4%.
We're guessing Fed Chair Yellen would have preferred to have another acceleration in hourly earnings and a dip in the unemployment rate along side the hefty 211K leap in November payrolls, but no matter. At its October meeting, the Fed wanted to see "some further improvement in the labor market", and by any reasonable standard a 509K total increase in payrolls in two months fits the bill.
Yesterday's surprising decline in the Eurozone unemployment rate adds further evidence to the story of a slowly healing economy. The rate of joblessness fell to 10.9% in July from 11.1% in June, the lowest since the beginning of 2012, mainly driven by a 0.5 percentage point fall in Italy, and improvement in Spain, where unemployment fell 0.2 pp to 22.2%.
Mexico's economy hit a sticky patch in the first quarter, with confidence slipping, employment growth slowing and the downward trend in unemployment stalling. Indeed, the headline unemployment rate rose to 4.5% in May from 4.3% in April. The seasonally adjusted rate, though, was little changed at 4.4%, with a stable participation rate.
The two key planks of the argument that a substantial easing of fiscal policy won't be inflationary are that labor participation will be dragged higher, limiting the decline in the unemployment rate, while productivity growth will rebound, so unit labor costs will remain under control.
The stand-out news yesterday was the increase in the headline, three-month average, unemployment rate to 4.4% in December, from 4.3% in September.
A couple of Fed speakers this week have described the economy as being at "full employment". Looking at the headline unemployment rate, it's easy to see why they would reach that conclusion.
German labour market data continue to break records on a monthly basis. The unemployment rate was unchanged at 6.2% in A pril, with jobless claims falling 16,000, following a revised 2,000 fall in March. March employment rose 1.2% year-over-year, down slightly from 1.3% in February, but the total number of people in jobs rose to a new high of 43.4 million.
The core economic narrative in U.S. markets right now seems to run something like this: The pace of growth slowed in Q1, depressing the rate of payroll growth in the spring. As a result, the headline plunge in the unemployment rate is unlikely to persist and, even if it does, the wage pressures aren't a threat to the inflation outlook.
We argued yesterday that the August payroll number is unlikely to be a blockbuster, thanks to a combination of problems with the birth/death model and the strong tendency for this month's jobs number to be initially under-reported and then revised substantially higher. But these arguments don't apply to the unemployment rate, which is derived from the separate household survey.
Should you be feeling in the mood to panic over inflation risks--or more positively, benefit from the markets' underpricing of inflation risks--consider the following scenario. First, assume that the uptick in wages reported in October really does mark the start of the long-awaited sustained acceleration promised by a 5% unemployment rate and employers' difficulty in finding people to hire. Second, assume that the rental property market remains extremely tight. Third, assume that the abrupt upturn in medical costs in the October CPI is a harbinger o f things to come. And finally, assume that the Fed hawks are right in their view that the initial increase in interest rates will--to quote the September FOMC minutes--"...spur, rather than restrain economic activity". Under these conditions, what happens to inflation?
Chief US economist Ian Shepherdson on the latest Jobs report
Chief US economist Ian Shepherdson on the latest Jobs report
Chief US economist Ian Shepherdson on the latest Jobs report
Senior International Economist Andres Abadia on Chile's jobless rate
Chief U.S. Economist Ian Shepherdson on U.S. payroll gains
Provocative notes from Ian Shepherdson, the Chief Economist at Pantheon Macroeconomics
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