Friday July 8, 2016 - 22:21:06 GMT
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U.S. Employment Data Mean Reversion. Now U.K. Brexit II?
John M. Bland, MBA
June Jobs Roar Back
Traders were left scratching their heads following the June employment report Friday which indicated that employment had gained by 287K in the month. This was substantially higher than the revised gain of only +11K in May. The consensus forecast had been for a 180K advance. The average monthly increase in Jobs for the last three months has only been 147K. Some economists say the U.S. needs to be producing jobs consistently above 200K per month for the Fed now to even consider a rate hike.
Furthermore, Average Hourly earnings, a measure of worker scarcity increased by only 0.10% in the month, below the 0.20% consensus forecast and under the 0.30% or 0.40% per month the Fed would like to be seeing as an indication that excess labor slack is being taken up. On balance this is a mixed report at best and certainly will not be decisive for Fed policy in the immediate future. Following the data, Fed Funds futures were pricing in only one in five odds for a rate hike this year from one in twenty before the release.
U.K. Brexit II?
A key development over the past week was the narrowing of the number of candidates to be the next U.K. Prime Minister to two. It was the 330 Conservative MPs who winnowed the field down, but it will be the 150,000 members of the Conservative Party who will decide between Theresa May and Andrea Leadsom for who will be selected. May was a "Pro-Stay" supporter in the Brexit vote, while Leadsom was "Pro-Leave". The majority of Conservative MPs were pro-stay, so this could shape up to be a second-round Brexit vote. Brexit is the gift that keeps on giving.
POLL: WHO WILL BE THE NEXT U.K. PRIME MINISTER?
WEEKLY HIGH IMPACT NEWS:
No Major Data
14:00 US- JOLTS
17:00 US- 10-yr
14:00 CA- Bank Of Canada
14:30 US- Crude
18:00 US- Beige Book
00:30 AU- Employment
11:00 GB- Bank Of England
12:30 US- Weekly Jobless
09:00 EZ- final HICP
12:30 US- Retail Sales
12:30 US- CPI
14:00 US- University of Michigan
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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