7 Sep 2015
US NFP adds fuel to the Sept Fed hike debate - TDS
FXStreet (Bali) - Michael Dolega, Senior Economist at TD Economics, notes that last Friday's US NFP, only managed to further cloud the picture of the underlying health of the U.S. economy.
Key Quotes
The US NFP highly anticipated employment report was expected to clarify, but instead managed to further cloud the picture of the underlying health of the U.S. economy. The headline payroll gain certainly disappointed, with significant contractions in manufacturing and mining sectors.
While not surprising given the global backdrop, losses were more severe than expected. This suggests that weaker global demand and slumping oil-patch investment may be having more of an impact on the U.S. economy than anticipated earlier.
Moreover, overall private service sector gains, at just 164k, were the weakest since March – when Boston and much of the Northeast was buried under several feet of snow. On the other hand, one can take some comfort from the fact that government has in recent months added consistently to payrolls after years of weakness.
Adding even more fuel to the debate is the decline in the unemployment rate and acceleration in wage gains. The jobless rate, which at 5.1% is consistent with current estimates of the natural rate should not, in and of itself, induce the Fed to raise rates in September. But, if it manifests in stronger wage pressures in the coming months, we could conceivably see the Fed moving later this year.
All in all, while there are reasons not to put too much emphasis on this report, we nonetheless feel that the details are not overly reassuring as far as U.S. economic strength is concerned. In light of this, and continued global uncertainty and market turmoil, we expect the Fed will delay its long-awaited liftoff in September.
Key Quotes
The US NFP highly anticipated employment report was expected to clarify, but instead managed to further cloud the picture of the underlying health of the U.S. economy. The headline payroll gain certainly disappointed, with significant contractions in manufacturing and mining sectors.
While not surprising given the global backdrop, losses were more severe than expected. This suggests that weaker global demand and slumping oil-patch investment may be having more of an impact on the U.S. economy than anticipated earlier.
Moreover, overall private service sector gains, at just 164k, were the weakest since March – when Boston and much of the Northeast was buried under several feet of snow. On the other hand, one can take some comfort from the fact that government has in recent months added consistently to payrolls after years of weakness.
Adding even more fuel to the debate is the decline in the unemployment rate and acceleration in wage gains. The jobless rate, which at 5.1% is consistent with current estimates of the natural rate should not, in and of itself, induce the Fed to raise rates in September. But, if it manifests in stronger wage pressures in the coming months, we could conceivably see the Fed moving later this year.
All in all, while there are reasons not to put too much emphasis on this report, we nonetheless feel that the details are not overly reassuring as far as U.S. economic strength is concerned. In light of this, and continued global uncertainty and market turmoil, we expect the Fed will delay its long-awaited liftoff in September.