Sunday, 6 April 2014

Short update post US jobs

A short Sunday update after a week in the US.The US jobs report deserves two charts, but not more. The top one shows real GDP growth, and employment growth from the non-farm payroll data. Year over year employment growth on this measure picked up a bit to 1.66% in March. It's over three years since annual employment growth was outside a 1.5-1.9% range. The first Friday of the month isn't as thrilling as it used to be!

Since 1990 (the period covered by this chart), employment growth has averaged 1%, and real GDP growth 2.5%. The period of tediously boring employment data since Q4 2011, has seen employment growth average 1.7%, and real GDP average 2.3%, so more jobs are created than has been the norm since 1990 but productivity has lagged pretty badly. Why? the wrong kind of jobs (too many self-employed, or part-time jobs), perhaps?
The second chart shows the annual growth of average hourly wages for non-supervisory workers, and the unemployment rate (inverted). The slowdown in wage growth (on this measure, from 2.4% per annum to 2.2%), was the most significant piece of information in the jobs report because without a pick-up in wage growth there is virtually no chance that the Federal Reserve will deviate from its dovish policy stance. And indeed, very few investors, traders or financial market participants in general will be worried about inflationary pressures unless or until wage growth picks up a god bit further. Mind you, the current modest acceleration in wage growth is enough for the traditional correlation between lower unemployment and f aster wage growth to be re-asserting itself. So we may not worry now but as the unemployment rate falls, it seems wage growth is indeed responding. Now, I live in a country where wage growth is still well below inflation and I see this re-coupling in the US as good news for Americans, and a reason to be just a teeny-weeny bit jealous!
So there you have it  - an OK pace of jobs creation, a pause in the acceleration in wage growth, and nothing much for financial markets to get het up about. There's still lots and lots and lots of cash looking for a place to be invested.

No comments:

Post a Comment