Friday, 7 September 2012

Mike Lenhoff: US Non-farm payrolls disappoint

Today’s non-farm payrolls were disappointing on both headline and private sector numbers. Contrary to what might have been expected on the basis of yesterday’s news for today’s employment report, the August figures were disappointing. They came in well below the expectations formed late last week. While the unemployment rate registered an improvement from 8.3 percent in July to 8.1 percent for August, this was due to a reduction in the work force and no doubt reflects ‘discouraged’ workers just choosing to call it a day in the search for a job. Also, July’s employment numbers were revised downwards.

This is likely to reinforce the sentiment expressed by the Fed Chairman at Jackson Hole when he commented on the stagnation of the labour market and the grave concern it generated, not just for the jobless but for the structural damage its persistence poses for the economy. On the face of it, the Fed is now likely to see the report as a case for more action when the FOMC meets next week to review policy. That prospect might still keep the US equity market happy. However, it might have preferred to see a  better employment report and the sturdier economy that this would have implied – though the bond market might not have liked it.


Mike Lenhoff
Chief Strategist

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