Pete Wargent blogspot

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

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Sunday, 8 May 2016

US earnings picking up

Jobs growth slows

The pace of US monthly payroll hiring slowed to 160,000 in  April, below expectations and the softest result in 7 months. 

Mining employment declined yet again for a 19th successive month, to be down by a staggering 22 per cent or 191,000 over that time (h/t Dr. Caton, BT Financial).

Australia's resources sector faces a similar predicament.

Construction employment also underwhelmed, being fairly flat in April.

There were, however, some solid monthly gains in employment, including in professional and business services (+65,000) and healthcare (+44,000). 

Some moderate downward revisions (-19,000) were booked for the previous two months, which took a bit of gloss off a result which didn't have much sparkle to begin with.



There have now been 82 consecutive months of payroll gains, although the pace of hiring may be slowing a touch lately. 



The average monthly payroll gains in 2016 have slowed to well below 200,000, which may be indicative of something of a loss of momentum in the economy, and appears likely to delay the urgency of Federal Reserve interest rate hikes. 



The unemployment rate ticked down slightly to 4.98 per cent in April, although in rounded terms the reported unemployment rate was flat at 5 per cent. It seems reasonable to expect that monthly employment growth of around 150,000 could keep the unemployment rate steady at this level. 


Despite the soft headline result, average hourly earnings picked up the pace in rising by +0.3 per cent in the month to be up by a solid +2.5 per cent over the year to April. 


The wrap

Overall the softer result may slow the pace of interest rate hikes from the Federal Reserve, with some analysts now expecting only one further hike in 2016, which in turn has implications for the Australian dollar.  

The Fed raised the overnight rate in December for the first time in nearly a full decade. 

The Aussie dollar is now buying 73.7 US cents.

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The most interesting data releases over the week ahead include Housing Finance (Wednesday) and Lending Finance (Friday). 

Industry scuttlebutt suggests that there was a bit of a pullback in homebuyer or owner-occupier approvals and particularly construction loans in March. 

The really interesting point of note will be to see whether this was in part the result of a rebound in investor loans early in 2016. 

The total value of investor loans had pulled back sharply in the latter half of 2016 following macroprudential intervention.

The number of owner-occupier approvals increased by 1.7 per cent in February, which only partly recovered a 4.8 per cent decline from the (less than reliable) seasonally adjusted numbers for January.