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29 Jan 2016
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27 Jan 2016
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25 Jan 2016
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22 Jan 2016
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21 Jan 2016
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20 Jan 2016
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19 Jan 2016
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18 Jan 2016
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15 Jan 2016
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14 Jan 2016
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14 Jan 2016
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14 Jan 2016
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13 Jan 2016
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13 Jan 2016
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12 Jan 2016
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12 Jan 2016
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11 Jan 2016
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11 Jan 2016
January: Non Farm Payrolls Out Today
08 Jan 2016
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08 Jan 2016
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08 Jan 2016
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07 Jan 2016
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07 Jan 2016
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06 Jan 2016
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05 Jan 2016
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04 Jan 2016
 
 
 

 

Well that was unexpected. At least it was by me and apparently by the majority of very well qualified (and very well paid) investment bank analysts. December’s Non-Farm Payroll number came in at 292,000 on expectations of a 203,000 increase. Not only that - the November figure was revised UP to 252,000 from 211,000. Bear in mind also that October’s stunning 271,000 reading (it was expected to come in at 181,000) was also revised up to 298,000.

These are exceptional numbers and no wonder the initial market reaction was bullish. US stock index futures jumped as did the dollar. After all, with employment data this strong the US economy must be firing on all cylinders. If that’s the case, why wouldn’t the Fed raise rates again at its next big meeting in March? In fact, let’s not be lily-livered, why not hike this month? I mean, I realise that the unemployment rate seems to be stuck at 5%, but that’s effectively full employment, isn’t it? And let’s not get too hung up about Average Hourly Earnings coming in flat. After all, that number does swing about a bit.

But perhaps the headline data doesn’t tell us the full story. In fact it doesn’t. As David Stockman and a few other observers have been saying for years, the quality of the jobs being created since the financial crisis is poor. While jobs are being lost in well-paid sectors like mining and the oil industry, there has been a sharp increase in the number of minimum wage ones. These include leisure and hospitality (bars, cafes and restaurants) and retail (shop assistants). Many are part-time which means that a high proportion of workers are either doing fewer hours than they would like, or are taking on more than one job to make ends meet. On top of this the labour participation rate remains near multi-year lows. This means that a large number of unemployed people aren’t counted as such because they have given up looking for work.

Ultimately wage growth matters. Consumer spending accounts for around 70% of all US economic activity. If people are struggling to make ends meet and going into debt as a result, then higher interest rates will only make matters worse. The headline payroll numbers look good, but they don’t tell the whole story. 

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Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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