Please find herebelow the PDF with Eurobank’s Monthly Global Economic & Market Monitor which presents its views on the outlook of the main developed economies as well as itsforecasts about major fixed income and currency markets.
- US nonfarm payrolls increased by a lower-than-expected 151k in January probably due to unusually mild winter weather, while the respective figure for December was revised downwards from 292k to 262k. With the US economy approaching full employment, some payback in employment gains seems inevitable. Even after taking the weaker-than-expected January figure into account, non-farm payrolls have increased by a hefty 215k on average over the last 6 months.
- In contrast to the establishment survey, the outcome of the household survey was rather solid as civilian employment gained 615k after a 485k increase in the prior month, with full-time employment surging to 538k. The unemployment rate declined unexpectedly to an 8-year low of 4.9% from 5.0% in December 2015, brushing aside another 0.1pp rise in the labor force participation rate to 62.7%. The latter has cumulatively increased by 0.3pp over the past four months, standing at its highest level since last May.
- Average hourly earnings increased by 0.5%MoM in January, surpassing consensus estimate for a rise of 0.3%MoM, with the annual rate of growth falling to 2.5% from a post-recession peak of 2.7% in December. Although average hourly earnings is by nature a very volatile series, the annual wage growth has been trending upwardly over the past year. Moreover, core PCE deflator, the Fed’s preferred inflation measure, gained 1.7% in the 12months through January from 1.5% in December, the largest annual increase in nearly three years.
- Even though January’s employment report and inflation data leave open the option of a fed funds rate hike at the March 15-16 FOMC meeting, we share the view that the Fed will likely stay on hold given heightened concerns about the sustainability of the US economic recovery following the recent string of weaker-than-expected domestic macroeconomic data, rising risks from the global economic slowdown and tighter financial conditions. Futures market is currently assigning a probability of about 55% for a 25bps rate hike by the end of 2016.