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Saturday, 7 July 2018

US recovery thunders on

Jobs galore

US payrolls increased again by a punchy +213,000 in June 2018.

The months of April and May were also revised up by a combined +34,000.

Totting all that up, it puts the 3-month average payrolls gain at +211,000.

This is now by far the lengthiest consecutive run of employment gains on record at 93 months.

The most interesting part of this release was the significant leap of more than 600,000 in the size of the labor force, as workers previously deemed surplus to requirements begin to search for work again. 

The unrounded unemployment rate to three decimal places jumped accordingly from 3.755 per cent to 4.048 per cent in the month of June, but for the 'right' reasons, while there was little change in the 3-month average unemployment rate.

Average earnings growth of +2.74 per cent rounded down (just) to +2.7 per cent, a slight miss on market expectations.

Back to work

Jobs galore, then, and it makes one wonder just how many more people could be working more hours in Australia absent the preoccupation with financial stability.

This dynamic is stimulating quite a bit of debate in the serious financial media at the moment.

The argument - apparently endorsed by the ever-hawkish BIS, though I haven't yet read their latest - seems to be that the US is growing solidly again, so Australia should hike interest rates either (a) to stymie household debt, or (b) to build up a buffer (i.e. tactical, so that rates could be cut again in the future).

Oh, and also cited is (c) the ubiquitous 'risk of an inflation breakout', which always seems to get a mention despite inflation having been benign for a long time now (and indeed, below target). 

The natural counter-argument is that the US is growing solidly because of its commitment to achieving the statutory objective of maximum employment. 

No logical reason why we shouldn't be pursuing the same here.