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Saturday 4 August 2018

The Fed still has time to observe the dynamics of employment

The statistics on the labor market published in the US turned out to be quite contradictory. On the one hand, the published data, including statistics on the growth rates of wages in July, coincided with market expectations (an increase of 2.7% year-on-year). But the data on unemployment and the number of jobs created outside the agricultural sector, diverged with market expectations. The unemployment rate in the US in July fell below 4% of the working-age population and was 3.9%. To a record low of May 2018 (3.8%), unemployment this time did not reach, but is already approaching this level, and the US economy - to full employment.
As for the number of new jobs outside agriculture, their number in July was 157 thousand, which is 17% below market expectations. In principle, this meaning can be further clarified or revised by the US Department of Labor, however, it may be that the dynamics of this indicator may again postpone the increase in the interest rate in the United States. It is usually believed that an increase of this figure by 200 thousand jobs a month adds about 3% to the US GDP. Now the growth was much less.
Fed noted that when deciding on the interest rate, inflation indicators and labor market conditions are necessarily taken into account. It's not excluded that at the next meeting the Fed can again postpone the decision to raise the interest rate, if this indicator of the labor market will again grow at such a low pace. However, it is possible that this is a temporary phenomenon, most likely related to seasonal factors, this indicator has a property to fluctuate strongly from month to month, so the Fed has time to observe the dynamics of employment and assess the state of the labor market.


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