September 10, 2012
Contrary to market expectations of a 140k gain US payrolls rose only by 96k in August. Moreover, the previous month’s increase was revised down by 22k to 141k. Still, the unemployment rate dropped by 0.2pp to 8.1%, courtesy of a further fall in the participation rate to a multi-decade low and the fact that the household survey (on which the unemployment rate is based) showed – contrary to non-farm payrolls – a decline in August employment.
Despite somewhat better monthly data (retail sales, orders and production, and the housing market) the labour market remains in the doldrums. This will keep a lid on private consumption growth and dampens hopes for an acceleration of quarterly growth. Whether the Fed will only strengthen its verbal guidance, rather than embarking on QE3 has become an even closer call after this data. All in all, we still believe that the Fed will extend its rate guidance to 2015 and probably outline some conditions which have to be met before a rate hike can be expected. If however, concerns about the US fiscal cliff weigh further on spending, thereby keeping the growth rate at around 2%, we will most likely see QE3 early next year, when the elections are out of the way.
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