US labour market: everything remains different – Commerzbank

Commerzbank's position with regard to the unemployment rate is very similar to last year's and currently stands at 4.2%, having changed very little in recent months. A year ago, it was 4.0%, rising only very slowly in the preceding months. The number of new jobs created has slowed significantly, however. A year ago, the three-month moving average was 185,000. However, on Friday, only 139,000 new jobs were reported, bringing the three-month average down to 135,000. And the Quarterly Census of Employment and Wages suggests that the number of new jobs created may be revised significantly downward again, Commerzbank's FX analyst Volkmar Baur notes.

Fed unlikely to see reason to cut its key interest rate by 100 bp

"This suggests that, although significantly fewer new jobs are being created than last year, this is not currently affecting the unemployment rate. This is probably because the number of Americans of working age is growing much more slowly than last year, which seems entirely plausible given the change in immigration policy."

"Consequently, in the coming months, the market is likely to focus more on the unemployment rate and the development of average hourly wages than on the number of new jobs created. Firstly, the unemployment rate is not revised in the same way as the number of new jobs created. Secondly, the Fed is primarily concerned with how tight the labour market is. After all, full employment is part of its remit. However, there is no target figure for new jobs created."

"If the labour supply is growing significantly more slowly, the Fed can easily tolerate lower figures for new jobs. Since the unemployment rate has hardly changed in recent months and is rising only very slowly if at all, the Fed is unlikely to see much reason to cut its key interest rate by 100 basis points any time soon. Even if the number of new jobs is significantly lower."