The beginning of the week started with heightened event risk when last Tuesday the Federal Reserve Charwoman, Mrs. Janet Yellen spoke about the Economic Outlook of the US and global economy during a talk given to the Economic Club of New York.
This speech was extremely dovish on the prospect of future interest rate increases when Yellen spoke of the need for a stabilization of foreign economies and markets and the impact of the strong US dollar.
This week will end how it began with today’s New York session preceded by the monthly Jobs Report which is due to be announced at 1:30 PM London time. The Bureau of Labor Statistics publishes the Jobs Report, which is made up of the Average Hourly Earnings, Unemployment Rate, and Non-Farm Employment Change releases.
Although all three reports are important as together they give a complete picture of the state of the United States employment market, the Non-Farm Payrolls number always receives the lion’s share of the attention.
In a prelude to this afternoon’s data releases, yesterday, the US Department of Labor published the missing piece of the Jobs Report picture when it announced the Unemployment Claims data. Unemployment Claims had been in steady decline since they hit a peak during the time when the great recession ravaged the United States and global economy.
As unemployment claims are published on a weekly basis, there is a lot of data points to consider however the downtrend in this number does support the good overall picture that we have seen in the monthly release of the Jobs Report. The prior week’s announcement was 265K, and the consensus view was that there would be a slight increase in claimants with a rise to 266K. Yesterday’s actual number was 276K.
Back to today’s releases, the markets are expecting the NFP number to be reported at around the 206K level which would be well below the prior month’s 242K. It should be noted that the actual NFP number published has tended to ignore analysts assessments in recent months. Therefore trying to glean anything from such forecasts would seem to have little value.
The Unemployment Rate report has also indicated that there is strength in the US employment market as the amount of those seeking employment has dropped from over 10% back in 2009 to 4.9% that was reported in the March publication. As the rate of unemployment is now so small, it would be tough for the NFP numbers to continually show such strength as fewer and fewer citizens are now looking for work.
Which brings us to the final part of the Jobs Report, which is, of course, the Average Hourly Earnings release. It is to be expected that businesses would begin to increase salaries offered as a means to retain and recruit employees? However, although the Average Hourly Earnings number have only on the occasional month indicated that wages are in fact increasing, there have been other months such as the March publication which were very disappointing.
We end where we started with Janet Yellen at the FOMC and the dual mandate of price stability and a healthy jobs market. The Federal Reserve is dependent on data, therefore, although it would like to see continued strength in the Jobs Report numbers, its will be hoping that the Average Hourly Earnings numbers begin to move in line with the rest of this publication.