US Employment Data Strengthens
Thursday’s Non Farm Payroll numbers are the key US data release this week, however as a precursor to this a relevant Employment Change statistic has just been released by ADP (Automatic Data Processing, Inc). The ADP Employment Change for June is showing 281k new jobs added to the US economy over the month, this is in comparison to the May figure of 179k and a consensus estimate for 200k. The ADP data enables some market positioning ahead of the key Non Farms, which as a guide are expected to come in at 213K compared to last month’s 217k.
The improving robustness of the US jobs market is very evident, there still however exist some serious structural issues that are not as of yet showing signs of abating. There remains a dearth of permanent and full time employment and this is having the effect of a fluidity in the market which is providing supply to employers and keeping wage inflation low.
The lack of wage growth is now presenting itself as a problem in this stage of the US recovery. Although consumer spending is holding up for now, there is a tapering off in both durable goods purchases and home loan applications. This is a manifestation of the fact that although individuals have cash in their pockets they are unwilling to commit to longer term purchase finance arrangements due to an uncertainty about their employment future.
There is a catch 22 situation here, this phenomena could be addressed by a change in unemployment laws to discourage more casual employment however this can only be effective, and could only be attempted, once the overall employment market strengthens. A tightening of the labor laws in anything other than a near full employment market could have the adverse effect of dissuading employers from taking on new workers.
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