On
Friday, the Labor Department released the jobs numbers for the month of
January. For the second month in a row, the number of jobs added passed the
300k mark. This was a better than expected jobs number. Not everything was
good. The unemployed rate moved slightly up to 4% from the previous month’s 3.9%.
The unemployment rate calculates the percentage of people of working age who
are not working. It excludes those who are working part-time for economic
reasons. The U6 unemployment rate is similar to the headline unemployment rate
number but it includes the people working on a part-time basis for economic
reasons. The U6 number too rose to 7.6%.
The average
earnings growth remained at 3.2% while the average working hours remained at
34.5. The two numbers matter because if the working hours and the average pay
rose, it would lead to increased productivity. To many economists, the
productivity growth is one of the most important factor in the economy. The
jobs numbers also revealed the divergence of the numbers released by the Labor
Department and ADP. On Wednesday, ADP showed that the number of jobs created in
January was slightly above 200k.
The
numbers were released a week after the Federal Reserve announced a pause of
interest rates. The bank said that the uncertainty of the global environment
was to blame for the new monetary policy decision. This is because the world is
faced with a number of uncertainties such as on trade, arms race, Brexit and
Venezuela. The emerging markets are also suffering from the impacts of a strong
US dollar.
Therefore,
with the US economy showing signs of health, there is a likelihood that the US
dollar may remain higher compared to other currencies. This is because other
countries are doing worse. Japan is in stagnation and recent data show that the
EU economy is doing worse. In fact, Italy is now in recession, which could last
for a considerable amount of time. China’s economy too is slowing down. In
fact, last week, the country released data that showed an expansion of just 6.5%.
Therefore, even with the US economy slowing down, it is still better than that
of its peer countries.
The
US Dollar index strengthened after the jobs numbers were released as shown in
the chart below.
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