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US: Payrolls report disappoints in June

Fri, Jul 3 2009, 07:38 GMT
by KBC Market Research Desk

KBC Bank

In June, US employment dropped by 467 000, according to the official payrolls report. This is significantly weaker than expected as markets had expected a decline by 365 000. The April figure was downwardly revised from -504 000 to -519 000, while the May outcome was upwardly adjusted from -345 000 to -322 000. Looking at the details, private payrolls dropped by 415 000 and government payrolls fell by 52 000. In the goods-producing sector, 223 000 (from -215 000) jobs were lost of which 136 000 (from -156 0000) in manufacturing. In the service providing sector employ-ment dropped by 244 000, more than twice as much as last month (-107 000). The civilian labour force dropped from 155.08 million to 154.93 million, while the number of people unemployed rose from 14.51M to 14.73M. The unemployment rate rose from 9.4% to 9.5% in June, slightly below the consensus estimate of 9.6%. After the improvement in temporary help agencies in May (-8 000 from -54 000), they fell back again in June (-38 000). Education and health was the only sector that added jobs. Average weekly hours worked fell from 33.1 to 33.0 and the aggregate hours worked index dropped from 99.8 to 99.0. This employment report comes as a disap-pointment to the markets as it raises fears that the improving trend was only temporary and it is too early for a sustained labour market recovery.

Factory orders surprised on the upside of expectations in May, rising by 1.2% M/M, while an increase by 0.9% M/M was forecasted. The previous figure was however downwardly revised from 0.7% M/M to 0.5% M/M. The breakdown shows a 1.8% M/M increase in durables goods orders, while non-durable orders rose by 0.7% M/M. Part of the increase was aircraft related, but also computers and machinery rose.

In the week ended June 27, initial claims dropped by 16 000 from an upwardly re-vised 630 000 to 614 000, broadly in line with the consensus. Continuing claims, which are reported with a one-week lag, dropped from an upwardly revised 6 755 000 to 6 702 000, while the consensus was looking for an outcome of 6 740 000.

EMU: unemployment increase to 9.5% in May

In the euro zone, the unemployment rate rose from an upwardly revised 9.3% in April to 9.5% in May, while the consensus expected a slightly lower outcome. Ac-cording to Eurostat’s estimates, the number of people unemployed rose by 273 000 in the euro zone, compared with April. The unemployment rate is now at its highest level since May 1999 and is forecasted to increase further in the coming months. Compared with one year ago, the lowest increases were observed in Germany and the Netherlands.

Other: Riksbank suprises by cutting rates and offering bank loans

The Swedish Riksbank surprised markets by cutting the repo rate by 25 basis points to 0.25% and added that the repo rate is expected to remain at this low level until autumn 2010. The Bank decided that the lower rate was needed to counteract the fall in production and employment and to attain the inflation target of 2%. The Risksbank also decided to offer 100 billion crowns of loans to the banks at a fixed in-terest rate and a maturity of 12 months saying that supplementary measures were needed to ensure that monetary policy had the intended effect.

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Published on  Fri, Jul 3 2009, 07:44 GMT