Global Roundup: Employment Reports

If you’ve been reading central bank updates long enough, then you should know that major central banks have been closely monitoring their respective economies’ jobs numbers.

In some cases, higher inflation is shrugged off because the employment scene isn’t improving fast enough.

Are central banks right to focus on jobs reports? Here’s a quick rundown of the latest releases:

New Zealand: Strong figures for Q1 2017

  • Unemployment rate improves from 5.2% to 4.9% vs. 5.1% expected
  • Employment up by 1.2% vs. 0.8% expected, 0.7% previous

The unemployment rate in New Zealand surprisingly dipped lower as the number of unemployed dropped by 4.4% while those who have jobs rose by 1.2% in Q1 2017.

Unemployment now sits at 4.9% – the best reading in six months – even as labor force participation rate edged up to an all-time high of 70.6%.

The Kiwi saw limited reaction, though, likely because the RBNZ is more focused on New Zealand’s housing market anyway.

Still, the better-than-expected jobs report, along with a strong dairy auction earlier that day, enabled Kiwi to gain a pip or two against its major counterparts during the release.

U.S.: Strong headlines, weak details

  • April non-farm payrolls at 211K vs. 190K expected vs. 79K previous
  • Unemployment rate slips from 4.5% to 4.4% vs. 4.6% expected
  • Average hourly earnings at 0.3% (m/m) and 2.5% (y/y) as expected

Uncle Sam’s unemployment rate surprisingly dipped lower to 4.4% in April, which marks the lowest reading since May 2007.

Non-farm payrolls (NFP) also surprised to the upside when it showed that a whopping 211,000 workers found non-farm jobs when analysts had only expected the number at 190,000.

But the devil is in the details. As I detailed in my last NFP report recap, the decline in unemployment rate is likely due to labor force participation rate falling from an 11-month high of 63.0% to 62.9%.

March’s jobs numbers were also revised lower. Non-farm payrolls was adjusted from +98K to +78K while monthly (0.2% to 0.1%) and annualized (2.7% to 2.6%) average hourly earnings were also revised lower.

The better-than-expected NFP headlines caused the dollar to spike across the board, but the rally soon petered out as traders digested the details.

Fortunately for dollar bulls, market players eventually went back into pricing in a June Fed rate hike despite the underlying weaknesses in the NFP report.

Canada: Full-time jobs down, part-time jobs up

  • Unemployment rate improves from 6.7% to 6.5%
  • Employment change clocks in at 3.2K vs. 20.0K expected, 19.4K previous

Much like in the U.S., Canada’s headline unemployment rate turned lower for the month of April. In this case, the 6.5% rate marks the lowest since October 2008. But also like in Uncle Sam’s data, it’s the details that make the overall picture tricky.

For one thing, labor force participation rate edged lower from 65.9% to 65.6%, which means that the unemployment rate might have gone down because workers got discouraged from looking for jobs.

And then there’s the jobs numbers breakdown, which reflects that the 3,200 net job increase was due to 34,300 part-time jobs offsetting the whopping 31,200 decline in full-time employment. Yikes!

Still, the Loonie ended the trading session higher against its major counterparts. Aside from the headline rate prompting the Loonie bulls, another possible reason for the rally is that oil prices had recovered after days of falling deeper into the red.

U.K.: “Challenging time” for British consumers

  • Unemployment rate down from 4.7% to 4.6%
  • Claimant count change: 19.4K vs. 33.5K previous

In its release last Wednesday, the U.K,’s Office of National Statistics (ONS) reported that the unemployment rate dropped from 4.7% to 4.6% in the three months to March 2017. That’s the lowest reading in 42 years, yo!

Digging further, we can see that employment rate also hit a record high of 74.8% as another 122,000 workers found jobs during the period. Not only that, but the economically inactive – those who are able but aren’t working or are not looking for jobs – slipped to its lowest on record.

It wasn’t all sunshine and butterflies, though. Average weekly earnings might have risen by 2.4% (including bonuses) and 2.1% (excluding bonuses) from a year earlier, but wages adjusted for inflation show that real wages only popped up by 0.1% (including bonuses) and even fell by 0.2% without bonuses.

This is bad news because inflation hit a 3.5-year high of 2.7% in April. This means that the Bank of England (BOE) was right to warn that consumers’ “wages won’t keep up with prices for the goods and services” as companies are still uncertain over the outcome of the Brexit divorce.

Still, pound bulls pounced at the better-than-expected headline numbers. One possible reason is that the BOE also sees wage growth improving “significantly” after remaining below pre-crisis levels for a bit.

Australia: Less worrying for the RBA

  • Unemployment rate slips from 5.9% to 5.7% in April
  • Employment change up by 37,400 vs. 4,500 expected, 60,000 in March

Australia’s seasonally adjusted unemployment rate unexpectedly fell from 5.9% to 5.7% in April, marking the lowest rate since January.

The decline in unemployment is legit, too, as labour force participation rate remained steady at 64.8% instead of slipping to 64.7%.

A closer look, however, tells us that the net gain of 37,400 jobs is actually from 49,000 part-time jobs picking up the 11,600 decline in full-time jobs. Not good for Australia’s consumers, who need a more stable source of income to boost their spending.

For now, the headline numbers support the RBA’s slightly more optimistic outlook on the labour market.

In its last statement, it noted that “The unemployment rate is expected to decline gradually over time.” However, wage growth will also remain “slow” and that it’s “likely to remain the case for a while yet.

This is probably why the Aussie jumped at the news but had limited momentum as it gave up most (if not all) of its gains during the London session.