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31 Jul 2014
US Unemployment Rate could be more interesting than payrolls this month – ING
FXStreet (Łódź) - Rob Carnell, Chief International Economist at ING expects the US NFP reading, due on Friday, to be largely in line with the strong numbers seen in recent months at 250K (in a range of 220-280K), so market focus could shift to the unemployment rate.
Key quotes
“The unemployment rate has been falling far faster than the Fed has indicated for almost as long as it has been forecasting it (or attempting to).”
“And at her most recent testimony, Fed Chair, Janet Yellen, admitted that if the labour market continued to improve faster than anticipated, then policy normalisation might also happen faster than suggested by the Fed member forecasts. So this matters.”
“The June unemployment rate fell from 6.3% to 6.1%, and there may be a temptation to forecast a pause in its decline following a sizeable move last month.”
“Indeed, the Bloomberg consensus is for no change in the rate, with a ‘low’ estimate of 6.0%. But the June unemployment rate number to three decimal places was 6.085%. In other words, it only needs a 0.36ppt decline to be revised down to 6.0%.”
“A further fall in the unemployment rate isn’t quite such a no brainer. Large rises in the labour force, like those in our table, will usually be accompanied by large rises in the numbers of unemployed (not falls) – even if employment growth is strongly higher.”
“But with this caveat aside, we feel the odds are stacking up in favour of another unemployment decline. A 0.1ppt decline to 6.0% is looking a sensible call. But we certainly wouldn’t rule out 5.9% either.”
Key quotes
“The unemployment rate has been falling far faster than the Fed has indicated for almost as long as it has been forecasting it (or attempting to).”
“And at her most recent testimony, Fed Chair, Janet Yellen, admitted that if the labour market continued to improve faster than anticipated, then policy normalisation might also happen faster than suggested by the Fed member forecasts. So this matters.”
“The June unemployment rate fell from 6.3% to 6.1%, and there may be a temptation to forecast a pause in its decline following a sizeable move last month.”
“Indeed, the Bloomberg consensus is for no change in the rate, with a ‘low’ estimate of 6.0%. But the June unemployment rate number to three decimal places was 6.085%. In other words, it only needs a 0.36ppt decline to be revised down to 6.0%.”
“A further fall in the unemployment rate isn’t quite such a no brainer. Large rises in the labour force, like those in our table, will usually be accompanied by large rises in the numbers of unemployed (not falls) – even if employment growth is strongly higher.”
“But with this caveat aside, we feel the odds are stacking up in favour of another unemployment decline. A 0.1ppt decline to 6.0% is looking a sensible call. But we certainly wouldn’t rule out 5.9% either.”