Labour market woes continue with slack movement in jobs


Labour market data continued to disappoint in October.  

Employment grew by just 9.8k in the month, after declining in the two months prior.  

Moreover, September's decline, which was previously reported as a 9.8k drop was revised to a fall of 29.0k.  This year has been a poor year of job gains.  

There has been an average of just 4.3k job gains per month over 2016 compared with average monthly job gains of 24.8k in 2015. 

The annual pace of growth has also softened, to 0.9%, the slowest pace of growth in nearly two years and well down on the November 2015 peak of 3.0%. 

The unemployment rate was unchanged at 5.6%, at a three-year low.  However, low workforce participation has kept the unemployment rate lower than otherwise would be the case. 

This data keeps the door to further easing from the Reserve Bank next year open.

New Zealand: ANZ job ads rose 0.6% in October, the ninth consecutive monthly gain.  On a year ago, job ads were 17.8% higher, and point to further solid growth in jobs.

Share Markets: 

US share markets were stronger overnight, helped by US Federal Reserve Chair's comments and a slew of data that pointed to a firmer US economy. 

The Dow Jones closed up 36 points (or 0.2%) and the S&P 500 index finished up 10 points (or 0.5%). 

The S&P 500 ended within a whisker of its all-time high struck in mid August this year.

Interest Rates: 

US 10-year treasury yields 7bp and the 2-year yield rose 2bp.  Much of the rise occurred after Fed Chair Yellen's speech (see below). 

Federal funds futures firmed, now implying almost a 100% chance of a rate hike next month.  Futures are also pricing one rate hike during each of the next three years.

Foreign Exchange: 

The US dollar rose to a fresh 14-year high after Federal Reserve Chair, Janet Yellen, helped cement market expectations for a December rate hike. 

These US rate-hike expectations caused the AUD and NZD to fall, despite risk sentiment remaining healthy. 

AUD/USD fell from 0.7488 to a four-month low of 0.7420. NZD/USD fell from 0.7110 to 0.7025 - also a four month low.  AUD/NZD ranged between 1.0520 and 1.0570. 

EUR/USD fell from 1.0746 to 1.0630 - the lowest since December 2015. USD/JPY rose from 108.90 to 109.88 - a six-month high.


World oil prices fell, as the USD appreciated, making oil prices in the currency less appealing to investors. 

Prices fell in spite of comments from  Saudi Minister of Energy and Industry; he told Al Arabiya television he's "optimistic" that OPEC will reach a deal to cut output and said that a production ceiling of 32.5 million barrels a day would speed the balancing of the market.

United Kingdom:  

Retail sales excluding fuel jumped 2.0% in October, taking the annual growth rate to 7.6%.  Cooler weather helped lead to a bounce in sales.

United States: 

Federal Reserve Chair, Janet Yellen, in her speech and Q&A to the Joint Economic Committee, said the case for a hike has strengthened. 

Yellen suggested a rate hike could be appropriate "relatively soon".  Yellen also said that that delaying hikes too long could mean a faster pace of normalisation in the future, and that keeping rates on hold could spur excess risk-taking. 

On the economy, Yellen said the data evidence is consistent with the Fed's economic outlook on improving growth and rising inflation, as outlined in the November statement.  She deflected a question on the Fed's response to fiscal policy, saying it's up to Congress to determine the mix of policies.  On her Fed term, she said there is no circumstance she can think of to cause her to end her term as Chair prematurely.

Consumer price inflation firmed to an annual pace of 1.6% (as expected), but the ex-food and energy measure slipped from 2.2% to 2.1% (versus 2.2% expected).

Housing starts jumped 25.5% to a 1.32 million annualised rate, the fastest since August 2007, and exceeding the highest forecast among forecasters.  Moreover, the increase from September is the biggest since July 1982.
Initial jobless claims plunged 19k to 235k in the week ended November 12, matching the lowest level since October 26, 1973. 

Over the last four weeks, claims have averaged 254k, which is below the 12-month average of 266k.  This data continues to signal a strengthening of the labour market.

The Philadelphia Fed index fell from 9.7 in October to 7.6 in November (versus 7.8 expected).  The index is still higher than the six-month average of 5.7. 

Most indicators in the Philadelphia Fed's Business Outlook survey painted a picture of a manufacturing sector that is struggling less than earlier in the year.