Now we’re out the other side of the traditional half hour’s toing and froing that markets always do when non-farm payrolls comes out, let’s talk about what it all means. I for one am a little tired of all the whooping and hollering concerning this flagship data print and, to us, it means very little. The US jobs market has been pretty much fine for months. Why aren’t people more concerned about the disappointing wage growth figure?  Well, maybe it’s because the labor force participation rate has broken out of a 4-year downtrend, which could indicate higher financial rewards tempting the Linda Evangelistas of America back to work. More people in work, re-injecting their income into the economy, would be music to an inflation-obsessed Fed’s ears.

So is this month’s wage growth miss a mere black swan, as the chart below may suggest? If not, then the black swan is the chart below. Confirmation is clearly required before we can talk rate hikes again, and that may not come by the time the FOMC sits down in March. The next opportunity is June which of course is up in the air, but note the fed likely moved in December to save face and prove to the markets that it was willing and able to act. Will it do the same in June?

This may answer that one: the second half of the year can be written off completely in our view, given we’re likely to see Donald Trump flying the flag for the republicans with a very real chance of winning the US general election. The Fed needs something to rein in, yet we expect little in the way of zen-like serenity in the global markets this year and even less in the way of runaway US growth.

Albert Einstein said ‘God does not play dice with the universe.’  I say ‘the Fed does not play dice with the global economy!’

Augustin Eden, Research Analyst (4 March)