Non-farm payrolls, ADP and jobless claims all tell a similar story.
- Delta is in the community but isn’t curtailing employment.
- Wage growth is healthy for the current environment, but is centre at the lower end
- Unemployment is fast approaching new post-COVID lows
- Unemployment claims are also falling as the fast rates since the pandemic begun
The conclusion from this is that the first mandate of the Federal Reserve is picking up to levels that the Board would hope, but not there yet even with non-farms average over 800,000 a month for the past period.
Then tie this with other forward-looking data
- Third quarter GDP projections are being revised down quickly on Delta issues.
- Supply chain disruptions are becoming a major issue with the globalisation of core materials really hitting core US exports and are clogging domestic demand for service.
- The semiconductor shortage in particular is now forecasted to have bigger and longer impact on US manufacturing than previously forecasted. This will continue to play out in the car industry and will continue to put inflation issues in automobiles.
- The Atlanta Fed's projection was downgrade to 3.7 per cent growth rate, from 5.3 per cent at the end of last week.
- The Atlanta Fed's view on the real PCE growth has gone from 2.6 per cent to 1.9 per cent (transitory effects wearing off)
- For real gross private domestic investment its view is it will now be 19.3 per cent from 23.4 per cent.
Same conclusions really – things are positive but are slowing and external risks could impact US growth.
Thus looking to what I believe is the biggest event of the month September’s Federal Open Market Committee (FOMC) meeting and all this data suggests it can hold on even further to its tapering plans and tweaks to policy. Chair Powell basically state this at Jackson Hole, yes, the Board is considering its next steps, but there is no rush was the basic message.
Succinctly put by Atlanta Fed president Raphael Bostic on Thursday: “we’ve changed our long-run framework to say we’re not going to be pre-emptive in this but rather we’re going to let the economy continue to run until we see signs of inflation”.
Last week has put a big handbrake on the USD’s almost uninterrupted appreciation
EUR/USD smashed through $1.17 and hit a one month high at the close of $1.1876.
GBP/USD also broke out of the $1.37 handle and moved up $1.3835 and is testing resistance at $1.3845.
But it’s the movement in the AUD that is really interesting, only 2 weeks ago it was on track to test the $0.70 handle at $0.7119, now the pair is $0.7409. That is a new one month high and really this move is all down to the USD. The GDP figures where strong but lockdowns in NWS and Victoria has Australian in recession right now. Then there is iron ore which has gained by is still over US$50 a tonne off May levels. This is a USD story.
Thus as we head into the September FOMC meeting, positive data needs to be looked at with a fine tooth comb as the FOMC is finding reasons it not ‘good enough’.