Only 38,000 the number of jobs grew in May in the US. The dynamics in the labor market has slowed considerably .. The Fed is expected to maintain its intention to raise its key rate soon, but probably wait until the July meeting
in the US, the increase in employment outside agriculture has slowed significantly in May to just 38,000 points. The originally for previous months in March and April reported increases were revised by a total of nearly 60,000 points downwards. The unemployment rate fell from 5.0 percent to 4.7 percent, its lowest level since November of 2007.
The disappointing employment development can be explained only in part by the long strike at the phone company Verizon, because in the US statistics are not recognized strikers as employees. After the settlement of the labor dispute in late May is expected for June with a corresponding counter-movement. Without this special effect expected of job growth also fell very slightly from 72,000. In virtually all industries to a weak performance showed.
The labor market has lost momentum
The trend can be observed that the employment dynamics has lost in the last six months significantly momentum. Given the advanced state of the business cycle and only limited available supply of skilled labor that is not entirely surprising.
For the coming months we expect although again slightly higher, but overall moderate employment gains. Since the demand for labor is still relatively high, the wage inflation is expected to increase slightly. So far, however, this is – as measured by the increase in average hourly wages of 2.5 percent over the previous year – not worrying
What is the Fed from
Today’s employment report is only one.? although important jigsaw, which consider the Fed members in their overall view when they decide on a rate hike. The current US economic data (u. A. Strong increase in consumer spending) suggest that economic growth after the lean years beginning in the second quarter accelerated noticeably. In its latest economic report (Beige Book) the Fed registered moderate employment and wage growth and a slight increase in prices. Economy and inflation thus develop in the direction desired by the Fed.
In addition, many Fed officials have increasingly expressed the rate hike intentions of the Fed in recent weeks. However, the Fed is probably waiting to see whether the June employment report much better again fails. Also, the approaching end of the EU referendum in Britain and the risk of increased market volatility suggests that the Fed considers a shift in the interest rate increase necessary.
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Dr. Bastian Hepperle is Senior Economist of Bankhaus Lampe KG. The focus of his analyzes and assessments are global macro trends – particularly in the USA, Japan and China – as well as interest rates and currencies. Before that Dr. Hepperle for DekaBank and WestLB was also active in the research.
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