U.S. Nonfarm Jobs Soar – Market Looking to Fed

Daily Analysis - 07/03/2016

US Nonfarm Payrolls Soar Higher in February


After disappointing jobs figures were reported for January, February’s nonfarm payroll release from the Bureau of Labor Statistics surpassed expectations by a wide margin with 242,000 jobs added during the period. With job creation well above the Federal Reserve’s target, the data shows the labor economy may help shoulder the gradual pace of future rate hikes hinted at by policymakers.

Jobs in the US surge

Better than anticipation job creation figures were reported in February by the US Bureau of Labor Statistics. Payrolls rose by 242,000, surpassing expectations of 190,000, after having risen by a revised 172,000 in January. While the headline figure was positive, there were several negative implications, namely declining average hourly earnings. Despite the drop, the addition of jobs is expected to boost consumption and encourage spending, lifting the country’s economic growth. The US economy continues to add more jobs despite recent turmoil in financial markets and a global economic slowdown. The unemployment rate stayed flat at 4.90%, matching both expectations and the prior figure. The data could prove a silver lining for Federal Reserve officials as they prepare for the upcoming FOMC meeting after a disappointing start to the year derailed expectations of additional rate hikes in 2016.


Russian Inflation Plumbs 17-Month Lows

According to the latest data released by the Federal State Statistics Service, Russian consumer price inflation fell to 8.10% in February after having climbed to 9.80% during the prior month. The annualized figure printed below estimates of 8.50% as food costs, housing and transportation grew at a slower pace. Despite the drop, the value remains far from the Russian Central Bank’s target of 4.00% with the central bank forced to keep rates elevated due to inflation. The surge in inflation has been exacerbated by political shocks, the weaker Ruble, and the rapid decline in energy prices. On a monthly basis, inflation dropped to 0.60%, from a previous value of 1.00% while also missing estimates of 0.90%. The Russian Ruble continued to strengthen against the US dollar, with the USDRUB pair falling below 72 before rebounding.


Italian Economy Stagnant

The Italian economy grew at 0.10% over the fourth quarter of the previous year, remaining largely in stagnation in contrast with other regional peers, but also mirroring the growing sluggishness encircling the whole Euro Area. The Italian Statistics Office in its report stated that the main drivers behind the rise were household spending and exports while inventories continued to hold back growth. On an annualized basis, the economy grew by 1%, remaining at the same levels of previous readings while also matching expectations. With unemployment remaining relatively elevated in the country and few fiscal stimulus measures, the economy is grinding to a halt as it also faces the ongoing threat of deflation according to indications from recent data. The European Central Bank is preparing to announce more easing measures this week, with President Mario Draghi hoping to spur the economy as it faces global economic headwinds.


Weak Canadian Dollar Boosts Trade

The latest Canadian trade figures came in better than forecast for the month of January according to Statistics Canada. The trade deficit printed at -CAD$0.66 billion, beating expectations of -CAD$1.05 billion but slightly higher than the previous month’s revised deficit of -CAD$0.63. The weaker Canadian dollar combined with the resilient growth in the US economy helped spur Canadian exports by 1% or CAD$46 billion in January. An additional factor helping to boost trade was the sustained weakness in energy prices. During the month imports also rose by 1.1%, or CAD$46.65, keeping the country’s trade at a deficit. Despite the shortfall, the market turned their attention mostly to the rising exports to the US, which account for approximately 76% of Canada’s global exports, with Statistics Canada registering a 2.6% during the latest reporting period.


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