9 May 2016
Resilience of the USD and the firmness of US yields - BBH
Research Team at BBH, suggests that the resilience of the US dollar and the firmness of US yields after the monthly report showed the weakest job growth in seven months may be significant.
Key Quotes
“Just like strong jobs growth in the Q4 15-Q1 16 period (averaged monthly jobs growth 243k) did not translate to strong growth, the weaker jobs growth may, in fact, coincide with an acceleration of US GDP.
Of course, the jobs data was not horrific, and employment growth is expected to slow as full employment is approached. Nor were the details particularly troubling. Manufacturing added jobs when economists had been expected it to have shed workers. The workweek increased 0.1 hours, which given the number of American employees, translates into about 450k full-time equivalents (in terms of hours worked). Not only were there more people working a longer work week, but they were also getting paid slightly better. Average hourly earnings rose 0.3% for a 2.5% year-over-year pace.
Perhaps the most troubling part of the report was not the miss on the headline but the decline in the participation rate. It fell from 63%, a two-year high, to 62.8%. The participation rate has been trending higher, and we caution against reading too much into a single data point.
On balance, one must (and we suspect the Federal Reserve will) conclude that the labor market recovery remains intact. In any event, the Fed will get another reading before next month’s meeting. The issue, which the FOMC’s April statement identified, is consumption. We anticipate better numbers ahead, beginning with this week’s April retail sale report.”
Key Quotes
“Just like strong jobs growth in the Q4 15-Q1 16 period (averaged monthly jobs growth 243k) did not translate to strong growth, the weaker jobs growth may, in fact, coincide with an acceleration of US GDP.
Of course, the jobs data was not horrific, and employment growth is expected to slow as full employment is approached. Nor were the details particularly troubling. Manufacturing added jobs when economists had been expected it to have shed workers. The workweek increased 0.1 hours, which given the number of American employees, translates into about 450k full-time equivalents (in terms of hours worked). Not only were there more people working a longer work week, but they were also getting paid slightly better. Average hourly earnings rose 0.3% for a 2.5% year-over-year pace.
Perhaps the most troubling part of the report was not the miss on the headline but the decline in the participation rate. It fell from 63%, a two-year high, to 62.8%. The participation rate has been trending higher, and we caution against reading too much into a single data point.
On balance, one must (and we suspect the Federal Reserve will) conclude that the labor market recovery remains intact. In any event, the Fed will get another reading before next month’s meeting. The issue, which the FOMC’s April statement identified, is consumption. We anticipate better numbers ahead, beginning with this week’s April retail sale report.”