• Average employment growth close to 200.000 in Q2
• Several positive details
• Supports Fed tapering plans
Average employment growth close to 200.000 in Q2
Today’s employment report showed itself absolutely from the positive side. Not only did nonfarm payrolls rise more than expected in June, with 195,000 people, in addition, the previous two months employment figures were revised up by 70,000 people. Employment growth in the second quarter has averaged 197,000 people per month, which is comparable with a more full blown healing of the labour market. The number was a pleasant surprise even though some might have lifted expectations after the ISM non-manufacturing and ADP number earlier in the week.
Several positive details
In the detail it was as expected primary employment in the services sector which pulled up, while government and manufacturing employment kept the small declines. Furthermore, there was a little more positive contribution from construction – a trend we hope will continue in the future. The unemployment rate did, however, not decrease as expected, but today’s the unchanged unemployment rate at 7.6%, was of the positive kind based on a roughly equal increase in employment and the labor force. the participation rate did also increase another month to 63.5%. Finally, it was very encouraging to see that the income pulled up by 0.4% in June compared to May, which is the largest incomes in nearly two years.
Supports Fed tapering plans
Our conclusion is that today’s employment report absolute primes expectations for fed to begin QE tapering in September. The report overshadows the overall disappointing ISM reports we received earlier in the week, which as a whole pointed to a somewhat bigger growth moderation in Q2 than expected. Thus we see that the Fed’s tapering plan is intact with today’s figures, but the picture may change, however, should business barometers decrease further and/or if inflation does not rise soon from the current low level. Finally, there is the risk of today’s labor market figures will be revised down at a later date – given our (and others) too pessimistic forecasts on todays numbers.
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