Jobs growth: So far, so good

Jobs growth: So far, so good

A fairly strong U.S. jobs report for May cheered stock markets and dented bonds slightly; another outbreak of tariff trauma got much attention, a round of musical deck-chairs played out in capitals of two of the more troubled European economies.

“[I have] a lot of determination to modernize our country, [as] the Socialist Party has always done.”
Newly-chosen Spanish Prime Minister Pedro Sanchez

Jobs growth: So far, so good The U.S. jobs report for May came in solidly above expectations, with the headline unemployment rate at 3.8%, a low last seen in April 2000 at the end of the tech boom. Hourly earnings, the most closely-watched number from the report, rose 0.3% from April, and 2.7% year-over-year for the 12 months ended May 2018.

The overall report was regarded as bullish by equities; the Dow Jones Industrial Average up about 236 points (0.97%) and the Euro Stoxx 50 up 47 points (1.38%) as of 1:40 PM Friday June 1.1 Focus appeared to be on the continued strong demand for workers and rising wages. It was a bit different for the bond markets, which appeared to read the news as favoring a total of two more rate hikes in 2018 rather than only one.

One intriguing number, reflecting a positive outlook on the part of workers: U.S. job leavers as a percent of total unemployment came in at 13.8% for May, a high not seen since February 2001. The logic: leaving a job, whether or not one has another, suggests either an increase in income which makes leaving economically attractive, or the belief that new jobs will be easy to come by when the time comes to rejoin the work force.

European politics: Musical deck-chairs In Italy, the newly-accepted ruling coalition turned out to have the same members as the one rejected by the President just days beforehand -- but with the problematic openly-Eurosceptic Finance Minister moved to the European Affairs desk. In Spain there was an actual job loss; due at least in part to a continuing corruption scandal, Prime Minister Mariano Rajoy was replaced as Prime Minister by Socialist leader Pedro Sanchez in a parliamentary vote of no-confidence. The final blow was dealt by what Mr. Rajoy called a “Frankenstein coalition” of the anti-establishment group Podemos and a faction of Catalan separatists, joined by the Basque Nationalists.

Global tariffs: All in the family The latest and loudest disagreements about tariffs are taking place among longstanding members of global alliances as well as across global spheres of influence. The stories about trade between the U.S. and Europe, and between the U.S. and the other members of NAFTA are moving too rapidly for a quick review. But it appears certain that these arguments could leave long-lasting disruptions of politically important regional relationships, making future agreements of any sort a challenge. 


1 All data Source: Bloomberg, at the time specified.


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