Get 40% Off
💎 WSM is up +52.1% since our AI picked it in December! Unlock all premium stock picksUnlock now

US Job Expansion To Solidify Rate Hike Hopes -- For Now

Published 10/02/2015, 03:39 AM
Updated 07/09/2023, 06:31 AM

Making It Up

The global slowdown in manufacturing continued yesterday with poor measures in Asia, Europe and the United States highlighting the uncertainty around the foundations of this recovery. The most surprising slump was probably in the United States as the manufacturing ISM fell to 50.2 – stagnant to all intents and purposes – with only seven of the constituent 18 industries within the manufacturing sector showing expansion.

The story of weakness is an easy one to follow as first energy industries slumped on lower commodity prices and that spread through the remainder of its derivatives – plastics for example. The strength of the US dollar and the weakness of export markets are obvious laggards too. It seems to us now that the strength seen in manufacturing in the first half of the year has rebuilt inventories but stockpiles of goods now mean that new production is not needed.

Similar noises were heard from the UK manufacturing sector yesterday although export numbers did move into expansionary territory for the first time since March. GBP’s slight stumble in August and September may have driven this as well as weakness in domestic demand.

There was little in either numbers to suggest an immediate bounce back to strong or robust growth in the short term and we must assume that manufacturing data remains poor moving forward.

Payrolls not the firecracker they once were

For the first time in a while it seems that the latest labor-market report from the US is set to continue that malaise. Today’s payrolls report from the United States has to be one of the least feted we’ve seen in a while. Market focus is mainly about financial risks – stock market falls, currency wars, bond market liquidity, corporate solvency – more than a strict interpretation of how the labor market is progressing. US jobs market news has been good enough for a rate hike for a while now, it is other factors that have been delaying the Fed’s normalization.

The balance of risks therefore lie to the negative, and a reading of sub-175k – with consensus at 200k – will take the dollar lower than a similar sized beat would boost the USD. There are doubts that any fallout from the global wobble seen in August and September will be seen in these numbers however. That is not to say that job losses may not be forthcoming but the survey period for this reading may have missed the bulk of the cuts.

We’ll find out at 1.30pm BST and our focus will be on the wage numbers as the wider conversation of economic health moves from a repairing labor market to wage inflation and the sustainability of tighter financial conditions.

The day ahead

As is typical on payrolls day we expect the morning session to be all but dead in the lead in to the figure. UK construction at 09.30 will be interesting as we wait and see whether recent fears of bond-yield changes and interest-rate increases are weighing down on future production. Growth is expected to remain strong.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.