Read what you like from the US Jobs numbers ...... No seriously, there's something there for everybody.

Monday 11th January 2016

 

Read what you like from the US Jobs numbers ...... No seriously, there's something there for everybody.

ref :- "Hiring Ends Year on Strong Note, but Wage Growth Remains Sluggish" The Wall Street Journal Online

Remember that December US Employment data out on Friday ? The WSJ headline above says it all really :

Non-Farm Payrolls up 292,000 (expected 210,000) Unemployment Rate 5.0% (as expected) Average Hourly Earnings unchanged (expected +0.2%)

Whatever your point of view with regard to future for the economy and rates, that NFP number is undeniably a strong one and means that the final quarter of 2015 was the strongest on the jobs front by some distance. That should play into the hands of those, including the Fed itself, who believe that the economy is robust enough to handle both international headwinds and four 25bp rate hikes in 2016. And at first glance, that may seem like a perfectly reasonable deduction to draw from the data.

But why didn't all this impressive job creation translate into the headline Unemployment rate ? Simply, the labour force expended by nearly half a million in December. We hear estimates that unemployment may bottom out at about 4.7%  --  actually the lowest forecast we heard was a very bullish 4.3%. That may be overcalling it,  but even if further falls are likely we're not there yet. The increasingly watched participation rate ( those actively looking for work as a percentage of all those in a position to do so) did tick up to 62.6, but remains near 40 year lows. In other words, the tightness in the labour market may be less than it seems at face value.

All this is reflected in the number we highlighted on Friday : Average Hourly Earnings. Slowing growth in China and emerging markets and the subsequent crash in commodity prices means there'll be no inflationary forces emanating from those directions anytime soon, so we should be on the lookout for the one remaining potential driver of inflation  --  rising wages. Rising wages mean rising consumption which means upward price pressure. At least, that's always been the accepted thinking. The thing is, unchanged Hourly Earnings numbers tell us that there is no sign of significant upward moves in wage levels. In fact, there is a growing band who have begun to question the strength of the link between slackness in the labour market and price pressures, but we'll leave closer examination of that for another day.

Traders and commentators would all say that they would always make an entirely unbiased judgement on any new data, regardless of their position going into the release. But it's only human nature to light upon information that coincides with your own way of thinking. And in this case it really is true ..... there is something in the data to suit every view. And the fact is that when all's said and done, the balance between the hawks and the doves will be pretty much unchanged.