Saturday August 13, 2016 - 00:10:57 GMT
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Is The U.S. Economy Taking Off Or Not?
John M. Bland, MBA
Skepticism About Jobs
Many market participants remain skeptical about the recent improvement in U.S. jobs data. While non-farm payrolls have improved in the last two months, they wonder about extreme weakness in the data earlier this year. When in doubt they start to look for confirmation in related statistics and anecdotal evidence. One popular statistic is the the unemployment rate, which has been improving significantly over the past several years, but this figure has a serious weakness because it is the ratio of two numbers. It is the number of unemployed divided by the size of the labor force. Some fell however the nmerator has been falling in part over the past several years because discouraged workers drop out. So the falling unemployment rate is suspect.
Next the wage rate (average hourly earnings) has been dead flat over the last couple of years, suggesting no developing tightness in the labor force. Lastly, there are questions about the quality of jobs being created. In the latest week we also saw an unexpected decline in 2Q16 labor productivity, which is another unsettling omen. As a result, markets are taking a cautious view on the U.S. economy at the present time. Friday then saw a disappointingly weak U.S. Retail Sales report for June.
Current Market Conditions
Forex traders tried to take the USD higher a week ago following the solid June employment report, but that attempt ran out of steam after the poor productivity report last Monday. Obviously traders are not convinced yet that a sustained USD lift-off is at hand. We see the same doubt expressed in Fed Funds futures, which indicate only slightly better than 50-50 odds in favor of only one rate hike by year end, despite persistent chatter from some Fed officials in favor of such a move. Looking ahead, Fed Chair Yellen is slated to speak on August 26 at the Jackson Hole Conference. This could be a market-moving event.
WEEKLY HIGH IMPACT NEWS:
No Major Data
08:30 GB- CPI
09:00 DE- ZEW Survey
12:30 US- CPI
12:30 US- House Starts/Permits
13:15 US- Industrial Production
00:30 AU- Employment
14:30 US- Crude
18:00 US- FOMC Minutes
08:30 GB- Retail Sales
12:30 US- Weekly Jobless
12:30 CA- CPI/Retail Sales
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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