US Employment v Rate Rise

As we mentioned in Friday’s Weekly Wrap, all eyes were on the US’s Non Farm Payroll (NFP) employment figures Friday night, especially after the prelude of Initial Jobless Claims (Thurs night our time) which rose for the 5th time in 6 weeks by 12,000, up to 282,000, its highest in 2 months.  We then heard Challenger forecast that 2015 is set to see the most layoffs by US businesses since the GFC, being on track to exceed 650,000.  So it should have been little surprise that the NFP printed just 173,000 new jobs, well below expectations of 217,000.  Of course all rejoiced the headline unemployment rate of only 5.1% but part of the underlying reason is that another 261,000 Americans simply dropped out of (gave up on) the work force, now totalling an incredible, and record setting 94m (the lowest participation rate since 1977).  This takes the increase in the number of eligible workers not participating in the workforce to 14.9m since the GFC started whereas only 4m new jobs have been created.  The only shining light is that average hourly earnings rose 0.3% against expectations of 0.2%.

Some argue this was the most important NFP yet as it is the last before the Fed’s September meeting (16/17 Sep) where bets are now running at 50% there will be a rate rise.  

Employment and inflation (2% target) are held out there as the main drivers for rates movement.  Despite all but the average earnings print and last week’s poor inflations figures many argue the Fed has finally realised they can’t keep waiting, further inflating markets with free money, and now is the time to rip the bandaid off despite the carnage that inevitably follows.