Amongst all the concern regarding potential damage to global trade from the imposition of additional tariffs by the US, China and the EU, the US economy has continued to produce jobs at a robust pace, reducing the number of Americans who wish to work more hours than they do at the moment and adding to the pressure for pay increases.
According to the US Bureau of Labor Statistics, the US economy created 201,000 jobs in the non-farm sector in August. However, the latest figures also include downward revisions to previous employment numbers and figures for June and July were revised down by a total of 50,000.
ANZ senior economist Cherelle Murphy said the figures, particularly the hourly pay numbers, added pressure for the US Fed to keep raising its federal funds rate. “The US labour market report came in better than expected with average hourly earnings growing at 2.9%, the quickest pace since May 2009. Headline non-farm payrolls rose 201,000 and the unemployment rate was steady at 3.9% with under-employment at 7.4%. All of this is consistent with the Fed tightening rates further, with the next hike expected in September.”
Economists were expecting around 191,000 additional positions and US bond markets reacted in a curious fashion. At the close of business, US 2-year bond yields were 3bps lower at 2.66% but 10-year yields had increased by 6bps to 2.94% and the yield on 30-year Treasury bonds had gained 5bps to 3.10%. The US currency was a little stronger against the euro and yen but steady against sterling. According to cash futures prices, the implied probability of a rate rise by the US FOMC at its September meeting remained just short of 100% while the probability of an additional rate rise in December jumped from a little under 70% to almost 80%.