Let’s admit that the monthly non-farm payroll report is among the most difficult for economists to forecast. There are not many reliable inputs as it is the first piece of real sector data for a new month.
Nevertheless, it is an important piece of economic data, and which, as we saw earlier in the year, a significant downside miss could freeze the Fed.
The pessimists have claimed that the US is generating low paying jobs. Nearly every monthly jobs report is followed by what seems to be a canned retort. The media picks up on the story and continues to regenerate it. Earlier in the recovery, the argument made sense. It makes less sense now.
On Labor Day, politicians have traditionally paid lip service to the plight of the worker, whom the national holiday is meant to honor. With working-class struggles taking center stage in this year’s election, we will likely hear from them more than usual talking about the steps they will take to reduce income inequality or end three decades of wage stagnation.
Some of them will go one step further and voice support for unions and collective bargaining, both of which have declined at the same time wages have stagnated.
Concern over the employment consequences of globalisation is again driving political debate. Look no further than the United Kingdom’s exit from the European Union and the rise of protectionism in American and Australian politics to see the disenfranchisement of low-skill workers with the effects of international trade. Judging by the dramatic change that has occurred in the global distribution of manufacturing output in the past 25 years it’s easy to see why these workers should be so concerned.
This Great Graphic comes from the Wall Street Journal. It shows what is happening to the pay of the least compensated in the US. Their pay is going up at a pace that is exceeding the averages and inflation.
The data is from Q2 16. Weekly wages for full-time employees in the 25th percentile, earning about $13 an hour, are up about 3.1% from a year ago. The Labor Department data show that this is the largest increase since 2009. The pace of increase exceeds the pay of median workers who make about $20 an hour for full-time work.
There is something for everyone in today’s US jobs report, and at the end of the day, it is unlikely to sway opinion about the direction and timing of the next Fed move. The greenback itself may remain range bound after the initial flurry. On the other hand, the disappointing but noisy Canadian data underscores the risk of a more dovish slant to the central bank’s neutral stance next week.
Initial previews of America’s job market indicate resurgence for workers, but economists remain wary. Jobless claims fell to their lowest point in three months last week, falling to 254,000 versus 270,000 the previous week. That is far below consensus expectations of flat jobless claims, as more Americans find new jobs and return to work.
The US employment data tends to be among the most important economic reports during the monthly cycle. It often injects volatility into the market. The report itself tends to be volatile and subject to revisions. Economists have little input on which to base their forecasts.
Amid a better if not strong risk appetite, sterling has rallied two cents from yesterday’s lows near $1.28 to poke through the $1.30 level in the European morning. It was helped by an industrial production report that was better than expected. Industrial and manufacturing output fell 0.5% in May. This was around half of the expected decline after a strong April advance (2.1% and 2.4% respectively).
Almost all developing countries have policies to promote small and medium-sized firms. The reasons for this choice are clear. Small firms appear to create lots of job with relatively little capital and jobs are desperately needed in sub-Saharan Africa with its growing young population. In contrast, large firms are usually ignored, it being implicitly assumed that their size indicates success.
Ghana is no exception.
