Forex Snapshot: Global Jobs Update – Part I

The health of an economy’s labor market has far-reaching effects on the entire economy (i.e. healthy labor market = higher consumer spending and sentiment), which is why winning forex traders always do their best to stay updated.

This here is the first part of a two-part series, and today, I’ll give y’all the lowdown of the key labor market indicators for the U.S., the U.K., the euro zone and Switzerland. Oh, most of the links go straight to the official reports, so y’all can read up on ’em if you really want to. And if you have any questions, feel free to shoot me one on the comments section. Forex Gump’s got your back yo!

The U.S.

U.S. Jobless Rate

According to the jobs report issued by the U.S. Bureau of Labor Statistics, the jobless rate for July 2015 remained unchanged at 5.3%, but saw a welcome improvement when compared with July 2014’s 6.2% jobless rate. The number of unemployed people also remained unchanged at 8.3 million, and the same can be said for the labor force participation rate, which held steady at 62.6% after going down by 0.3% back in June. Wage growth also finally picked up, growing by 0.2% in July after stagnating in June.

Moving along, non-farm payrolls in July saw a 215K increase, which is nice and all, but it still falls below the 12-month average of 246K. On a more upbeat note, June’s reading was revised upward from 223K to 231K. Most sectors saw job gains, but large chunks went to retail trade (+36K), healthcare (+28K), and professional and technical services (+27K). The mining sector, meanwhile, continues to see some weakness since 5K people lost their jobs.

As I already mentioned, the labor market has far-reaching effects on the entire economy, but the U.S. labor market is a special case since it also has a direct effect on the future direction of monetary policy (and forex price action). As I stated in an earlier article, Fed officials (and forex traders) are looking closely at the labor data to gauge the timing of a highly-anticipated rate hike, and it seems like the current data is enough to keep the possibility of September rate hike on the cards.

The Euro Zone

Euro Zone Jobless Rate

The seasonally-adjusted jobless rate for the euro zone was unchanged at 11.1%, according to Eurostat, which made forex traders sad since most of them were expecting it to tick lower to 11.0%.

Euro Zone Member Countries Jobless Rate

Source: Eurostat

As always, Germany was the top dog among the major euro zone economies, with 4.7%. France and Italy continue to lag behind with 10.2% and 12.7% respectively. Spain, meanwhile, continues to be a major headache with its ridiculously high jobless rate of 22.5%. Only Greece managed to do worse, with 25.6%. At least Spain’s jobless rate is lower when compared to June 2014’s 24.5%. Yeah, I admit – I’m a bit of an optimist.

The U.K.

I sure wish other economies will soon follow the U.K. in terms of data presentations. I mean, just take a look at the U.K. jobs report for Q2 2015 here, and marvel at how user-friendly it is.

U.K. Jobless Rate

Getting back on topic, Q2 2015’s jobless rate was unchanged at 5.6%, but saw a nice improvement versus Q2 2014’s 6.3%. Claimant count change was even more upbeat since it declined by 4.9K when it was expected to increase by 1.4K, which is great since it means that less people are queuing up to claim unemployment benefits. Better still, the previous reading was also revised to show a 0.2K increase instead of a 7.0K increase, which is a significant improvement. Wage growth was a bit of a downer, though, since the average earnings index only increased by 2.4% (2.8% expected, 3.2% previous) due to a 3.3% decline in bonuses.

U.K. Wage Growth

Source: U.K. Office for National Statistics

Aside from the U.S. Fed, the Bank of England (BOE) is also keeping tabs on the labor market for timing a potential rate hike sometme next year. To be more specific, the BOE stated in the latest MPC minutes, “The path of inflation thereafter would be determined by: the influence of domestic cost pressures, especially those emanating from the labour market.” In short, while the U.S. Fed is looking at the overall employment level, the BOE is more focused on wage growth, which means that the recent slump is actually bad news.

The BOE remains upbeat, however, since they maintain that “A further modest tightening of the labour market is expected, supporting a continued firming in the growth of wages and unit labour costs over the next three years.”

Switzerland

Swiss Jobless Rate

Ah, Switzerland. A land famous for its chocolates, Swiss army knives, and cuckoo clocks. There’s really not much to be said with regard to Switzerland’s labor market other than it’s really, really, stable. Heck, Switzerland’s jobless rate for July remained unchanged at 3.1%, which is really, really low since Switzerland also employs a lot of foreign labor. In any case, employment data isn’t really very important to Switzerland’s economy since Switzerland’s economy is driven primarily by exports and foreign investments rather than by consumer spending.

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  • Sam-David Chukwujioke

    I understand that the CHF is probably not affected by changes in consumer spending but what of the EuroZone? Are they affected by consumer spending just like the US and UK?

    • Well, it depends on the member country. Germany, for example, relies heavily on exports to fuel economic growth. France, on the other hand, used to be export-oriented too, but it has been suffering from trade deficits in recent years, so it relies more on consumer spending (and tourism) to support its economy. But for the entire euro zone, I guess the best answer to your question is that consumer spending is indeed somewhat important to the euro zone. At the very least, it’s one of the main drivers for inflation.

  • Sam-David Chukwujioke

    And BTW, nice work. I really appreciate it.

    • Thanks for checking out my blog and for the positive feedback. I really appreciate it, too!