Despite the immediately negative reaction to today’s announcement of non-farm payrolls, analysts are sceptical that number is bad enough to lead to another round of quantitative easing.General consensus from economists seems to be that the jobs number would have had to be really terrible to force the Federal Reserve’s hand towards more inflationary growth measures.
Indeed, Morgan Stanley Chief U.S. economist David Greenlaw even wrote yesterday, “The June jobs report is going to have to be very weak (perhaps along the lines of payrolls below zero) in order to open the door for QE3 – or something similar — at the next meeting.”
That didn’t happen. And even within the jobs report, there were enough bright spots to illuminate a dismal picture. Here are five of them:
- In reality, the jobs number wasn’t that much below expectations. A positive ADP private payrolls number led analysts to revise their expectations for NFP job growth higher, but those two measures have diverged sharply recently.
- Further, upward revisions to past data were positive, in particular in private sector hiring. The change in private pray payrolls rose a disappointing 84K in June. But upwards revisions of the May number from 82K to 105K make disappointment here hard to gauge.
- Brown Brothers Harriman’s Marc Chandler points out that hourly earnings rose 0.3 per cent in June, meaning that they were 2.0 per cent higher than last year. That beat expectations of 1.7 per cent growth.
- The government is still shedding jobs (4K in June), though not as quickly as it was before. Clearly, jobs growth is going to be slower if the government decides to take a back seat, and the numbers will show that. But this is a more sustainable situation in the long run.
- Greenlaw also pointed out that temporary help jobs rose by 25.2K, a rebound in that datapoint after some slow months.
That said, the Federal Reserve has taken a more active role to address concerns about the slowing economy than its counterpart in Europe, so we could still stand to be surprised at the Fed’s next meeting on July 31-August 1.