Sterling seems to be without a friend
This article is from Sean’s Midweek Macro Musings dated 12th October.
Non-Farm Payrolls drew something of a yawn but, coupled with a look at how business revenues are faring, they do tell us that a little stress is building.
Meanwhile, sterling seems to be without a friend in the world, not least back in Threadneedle Street.
For once the US employment report produced few fireworks, even though the tally of 167,000 private jobs added registered the second mild disappointment in a row in again falling beneath the past six-years’ average of 200k a month.
One reason for the relative anaemia in hiring might be the fact that while business sales for manufacturers, wholesalers, and retailers have been essentially flat over the past year—and, indeed, barely changed, on aggregate, over the whole of the past three—average hourly wages are clearly beginning to accelerate. In the past twelve months, these have recorded a gain of 2.6% – the fastest increase in the seven years since the world economy pulled out of its post-Lehman nosedive.
Add in the fact that non-wage costs are also rising sharply—not least for Obama’s problematical healthcare programme – and you can see why something of a battle might be developing between what the one datum suggests is a tightening supply of skilled employees and what is clearly demonstrated by the other—a general inability on the part of their would-be employers to increase turnover, no matter how many new (and more expensive) hands they set to the wheel.
In comments he made at a major banking seminar in Washington Friday, Fed Vice-Chairman—the eminence grise of modern central banking himself – Stanley Fischer, tried to set the detail of the report into the context of the FOMC’s thinking on policy (if we can grace its fractious procrastination with the dignity of such a title).
‘Nearing full employment but with some scope for further improvement’ was the gist of his somewhat equivocal spin on the situation – a verdict arrived at after the now-typical, non-committal rehearsal of just about every opinion on the matter being expressed by anyone with a PhD, a newspaper column, or a marketing job at an investment bank. Having thus clothed the intellectual nakedness of his posterior in obfuscation, our sage, while emphasising that the latest call on interest rates was a ‘close’ one (yawn), vouchsafed – to the surprise of no-one – that wait-and-see, alas, was still very much the watchword.
Were we to ignore all else and look at jobs alone – and were we to suppose the Fed to be the best agency to deal with any perceived lack of them, or that its actions to make good that lack did not entrain much deeper failings – some modest grounds for caution could however be found, as we show here.
And, as we all know, this is a Fed for which caution is its very meat and drink.