U.S. workers are getting raises the old fashioned way – by changing jobs; Mexico's new president-elect has had the apparent backing of financial markets so far; China's currency policies remained unchanged in the face of strong external pressure on trade.
“[The People’s Bank of China] will not make the yuan’s exchange rate a tool to cope with trade conflicts.”
U.S. Jobs: Changing Times Since the U.S. economic recovery, all eyes have been on the relatively sluggish growth of hourly wages, hoping that wage inflation would help boost domestic consumption, while fearing that rising wages would cut into corporate profitability. In that light, June’s inflation-adjusted average hourly wage growth year-on-year of 0.0%, for the second month running, did little to comfort proponents of consumer-led growth.
But employees appear to be seeking a different solution to the challenge of stagnant wages, by changing jobs. The Job Openings and Labor Turnover Survey for May (the “JOLTS report”), revealed that some 3.56 million workers voluntarily quit their jobs that month, a record number and the highest rate in 17 years. The quits rate was watched closely by former Fed Chair Janet Yellen as a measure of worker optimism over and beyond the unemployment rate.
June’s consumer prices, ex food and energy, rose 2.3% year over year, in line with expectations and personal consumption inflation reported earlier, suggesting that the JOLTS figures for June, which are scheduled to be reported in August, may contain few surprises.
Mexico: Looking Up The convincing victory of Andrés Manuel López Obrador (AMLO) as President has left currency markets relatively unruffled and helped boost Mexican equities by about 6% over the following week. The reaction seems to indicate that financial markets take the former firebrand at his word that his actions upon taking office at the end of the year will be constructive toward business.
China: Policy Stability The People’s Bank of China (PBoC)Governor Yi Gang clearly stated that the country’s policy toward exchange rates was unchanged, intending to “keep the yuan exchange rate basically stable at [a] reasonable and balanced level”. In addition, Sun Guofeng, head of the PBoC’s financial research institute said that the bank “will not make the yuan’s exchange rate a tool to cope with trade conflicts.” That last point was viewed as crucial in calming the concerns of other financial markets, as the trade tensions between the U.S. and other countries, including China, continued to grow.
Meanwhile, China’s new yuan loans in June came in at 1.84 trillion yuan ($275.0 billion), above expectations. This was consistent with China’s planned reduction in the banking required reserve ratio by 50 basis points, to 15.505, which could free additional capital with which to make loans.
All market-related data Source: Bloomberg, July 13, 2018 unless otherwise stated