Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 6 February 2016

US unemployment 4.9pc (lowest since February 2008)

71 months of job gains

If you are interested in what might happen to interest rates in Australia this year, one of the more worthwhile releases to follow is the nonfarm payrolls data from the US Bureau of Labor Statistics.

These figures will go some way to determining the trajectory of US interest rates hikes, and in turn will have a material impact of the Australian dollar exchange rate. 

The January figures were a little mixed. 

The pace of employment growth in January was considerably slower at +151,000 and well below expectations of +190,000 jobs, although this was the 71st consecutive month of gains, with close to 14 million jobs created over that time. 

In aggregate there were only moderate revisions to the previous months gains, meaning that the average employment gains for the past three months ticked down to +231,000 from a revised +283,000 in December.

Although gains for January were a little disappointing, it has been quite a remarkable turnaround since 2010 despite all the gloomy talk. 

Unemployment rate to 8 year low

The unemployment rate fell to 4.9 per cent, which is the lowest level in 8 years since February 2008.

Recall that as recently as 2014 forecasters expected the unemployment rate to remain above 5 per cent until at least 2020, so this metric is tracking well ahead of schedule. 

Significantly average hourly earnings picked up by 0.5 per cent - the biggest jump in a year - to be +2.5 per cent higher than one year ago.

The wrap

It will be interesting to see how this year unfolds with regards to further tightening of interest rates in the US.

This was perhaps a sluggish start to 2016 for employment gains, but the growth in average hourly earnings was a brighter spot. 

For the record the Aussie dollar pulled back sharply by -1.8 per cent to around 70.6 cents, which may say something of significance about how the market interpreted the rise in average hourly earnings.