9 Jan 2015
Consensus on US Job growth met, but big earnings disappointment - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that the US created 252k new jobs in December, while the October-November series was revised up by 50k.
Key Quotes:
"The participation rate ticked down to match the cyclical low seen last September of 62.7% (from an upwardly revised 62.9% in November). This was behind the decline in the unemployment rate to 5.6%".
"Hourly earnings were an important disappointment. Not only did they fall by 0.2% m/m in December, but the 0.4% rise in November (that was seen as a preliminary sign that the improvement in the labor market was finally seeing upward pressure on wages) was halved to 0.2%. The year-over-year rate slumped to 1.7%, the lowest since October 2012. This will become problematic for the Fed if it persists. As the FOMC minutes suggested, if the labor market continues to improve, which includes broader measures than simply the unemployment rate such as earnings, the Fed could still raise rates even if there is no further progress toward the inflation target".
"The manufacturing sector added 17k jobs, and construction added 48k. These points to a healthy increase in industrial output in December. Business services, leisure, and health care continue to post strong jobs growth. Recent data suggests the US economy may have grown around 3% in Q4".
"The US dollar traded higher across the board in response to the employment figures that we would read a bit more cautiously. The move in the December Eurodollar futures implying the lowest yield since mid-December is more in line with our cautious assessment than the knee-jerk gains in the dollar".
Key Quotes:
"The participation rate ticked down to match the cyclical low seen last September of 62.7% (from an upwardly revised 62.9% in November). This was behind the decline in the unemployment rate to 5.6%".
"Hourly earnings were an important disappointment. Not only did they fall by 0.2% m/m in December, but the 0.4% rise in November (that was seen as a preliminary sign that the improvement in the labor market was finally seeing upward pressure on wages) was halved to 0.2%. The year-over-year rate slumped to 1.7%, the lowest since October 2012. This will become problematic for the Fed if it persists. As the FOMC minutes suggested, if the labor market continues to improve, which includes broader measures than simply the unemployment rate such as earnings, the Fed could still raise rates even if there is no further progress toward the inflation target".
"The manufacturing sector added 17k jobs, and construction added 48k. These points to a healthy increase in industrial output in December. Business services, leisure, and health care continue to post strong jobs growth. Recent data suggests the US economy may have grown around 3% in Q4".
"The US dollar traded higher across the board in response to the employment figures that we would read a bit more cautiously. The move in the December Eurodollar futures implying the lowest yield since mid-December is more in line with our cautious assessment than the knee-jerk gains in the dollar".