US jobs: Steady as she goes after a brief wobble - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that it has now been 71 months since we last saw a monthly fall in US employment, giving this economic recovery really good markets for durability if nothing else.

Key Quotes

“And in this long stretch of jobs growth, the average monthly gain has been 201,000, which happens to be very close to the average of the last year (204k). A couple of bad months have been followed by a couple of goods months and the data are back on trend.

The US economy’s problems – soft productivity, lack of fixed investment, modest real income growth and worrying levels of inequality – are still there, but the economy is still growing. The University of Michigan’s Justin Wolfers compared it to “The Little Engine That Could “and that just seems very apt: not a strong recovery but one that goes on, and on...

The trend in wage growth is still up, but the rate of wage growth at 2.6% is still not worrying. Wherever full employment is, we’re not there yet (or if we are, we’re in an unknown world where full employment doesn’t bestow much wage bargaining power on workers).

All of which won’t take the Fed debate much further. The FOMC ought to get rates higher before the Phillips curve comes back to life, and the market prices in almost 50% odds of a move by the end of the year, but the belief that it’s better to wait than to tighten too early is intact.

There may be a marginal bias for the front end of the US yield curve to see slightly higher yields, and for the dollar to find a bit of support, but these figures were hardly the stuff of mighty moves. Investors will still have to look further afield for some yield, and ranges will mostly hold.”