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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 7 June 2016

US payrolls an absolute stinker

US payrolls dumped


One wonders sometimes whether someone upstairs isn't conspiring to keep Australian asset prices heading higher.

After a string of robust data back home, the jobs report from the US Bureau of Labor Statistics saw payrolls up by just +38,000, missing expectations of +160,000 by a country mile. 

More damagingly, there were downward revisions to previous months totalling -59,000. 

The response rate to the survey was low this month, so this could be an anomaly, and the headline numbers may have been impacted by the Verizon strike.

But there is clearly a risk that jobs growth in the US may be losing momentum.  

Average monthly payroll gains over 2016 year-to-date are now considerably lower than in each of the preceding two years. 

The US unemployment rate notionally fell to 4.7 per cent in May, with the participation rate down by 0.4 percentage points over the last two months to 62.6 per cent. 

While we'd all be much happier with an unemployment rate of 4.7 per cent than 10 per cent, in this instance the headline result does not represent a bullish result. 

Average hourly earnings were by by 5 cents to $25,59, to be up by a solid enough +2.5 per cent over the year.

The wrap

Overall, a fairly dreadful result for US payrolls this month, which missed market expectations by a huge margin, although there remains a fair chance that there will be upward revisions to these figures in due course.

The Aussie dollar bolted nearly 2 per cent higher on Friday - the largest gain in over a year - before settling at around 73.65 US cents.  

The Reserve Bank of Australia (RBA) will leave interest rates on hold today, but markets are pricing a high probability of rates being cut again by August.

The Melbourne-Institute (MI) Inflation Gauge recorded a reading of just 1 per cent over the year to May, it's lowest  ever reading since the gauge was born in 2002. 

After last quarters exceptionally weak official CPI results, another similarly soft reading for the second quarter on July 27 could prompt further monetary policy action.