Latest U.S. data show more jobs than job-seekers; Brazil and Argentina struggle to slow the sliding value of their currencies; G7 leaders share sharp comments ahead of their weekend summit meeting.
“Nobody is forever…we don’t mind being six, if need be."
US Economy: Hire and hire The Labor Department announced that U.S. job openings rose to 6.7 million (seasonally adjusted) at the end of April. That’s more than the 6.3 million job-seekers – the second month when there were more openings than unemployed workers. Whether that’s enough to spark a meaningful uptick in wages remains to be seen. May’s month-over-month wage growth was a healthy 0.3%, but it remains to be seen whether that is sustained. There’s little to suggest labor demand will subside soon; earlier this week, a key reading for service sector activity came in stronger than expected, with the non-manufacturing index from ISM (Institute for Supply Management) rising to 58.6 in May, handily beating consensus expectations.
G7 Summit: Unhappy family The U.S. move to impose steel and aluminum tariffs on allies as well as opponents set the stage for a tense meeting by G7 country leaders on Friday in Quebec. Few expect to see attendees find common ground over trade policy, given President Trump’s pointed statements reiterating his positions just before departing for the summit meeting – and comments by French President Macron on Thursday implying that the rest of the ground could go it alone if necessary.
Latin America: Pain management The Brazilian real fell sharply to its lowest value against the U.S. dollar since March 2016, the latest leg in the currency’s painful slide since late January (down over 20%). President Temer asserted “there is no risk of a currency crisis” while Central Bank president Goldfajn noted an additional $20 billion (USD) would be offered in the futures market by mid-month to counter foreign exchange (FX) volatility.
Speculation continued, however, that more dramatic measures (such as a hike in the bank’s benchmark rate, currently at 6.5%) could be necessary to stabilize the real, since its previous interventions in the currency market had little apparent effect. But things could be worse: consider Argentina, whose peso has plummeted even faster than the real – down more than 35% against the US dollar this year. As a result, it sought assistance from the IMF (International Monetary Fund), reaching a three-year, $50 billion loan agreement on Thursday – the largest ever of its kind – and a politically sensitive one for a country whose past relationship with the IMF has often been acrimonious.
Source: Bloomberg, Reuters, New York Times, Rio Times