“The most important figure of the month” came in lower than expected. The dollar and government interest rates are falling, while there is an increase in the stock markets.
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175,000 new non-agricultural jobs were created in the US in April. This is shown in the job report “Nonfarm payrolls” from the US authorities.
Analysts had previously expected 240,000 new jobs last month, according to estimates obtained by Bloomberg.
Job numbers have been surprisingly strong of late, before this month’s slower growth. In March, 315,000 new jobs were created, according to recently revised figures.
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This is the interest rate you should have now
– Interest rate sensitivity in the market means that bad figures become good news. This is enough to give hope that interest rate cuts may eventually come from the central bank, but I think you will probably have to wait until November before that happens, says Olav Chen, head of allocation and global interest rates at Storebrand
The “Nonfarm payrolls” report is an important indicator of how the US economy is doing. The number of new jobs is sometimes referred to as “the most important figure of the month”, and is followed by the market.
Along with price growth, the labor market is one of the most important things the US central bank, the Federal Reserve (Fed), looks at when interest rates are set.
In addition to job growth, the report contains figures for unemployment and wage growth in the US. Unemployment climbed to 3.9 per cent, which was higher than expected, while wage growth calmed down more than expected to 3.9 per cent.
Dollar weakness and Wall Street rise
In the foreign exchange markets, the US dollar weakened shortly after today’s figure release.
Against the krone, the dollar went from a rate of 10.89 just before, to costing NOK 10.81 shortly afterwards. The krone also strengthened earlier today after Norges Bank’s interest rate meeting.
The dollar also weakened against other currencies such as the euro and the Japanese yen.
US Treasury yields are also falling. The important American ten-year-old is currently at around 4.48 per cent at the time of writing, compared to 4.55 per cent shortly before the jobs figures came out.
In the stock markets, the rise in pre-trade on Wall Street has accelerated. S&P 500 futures are up around 1.2 percent at 14.50.
Belief in interest rate cuts in the US has generally fallen sharply in recent months, but on Friday it picked up a bit again. The market is now completely pricing in that the first interest rate cut will come in September. A second interest rate cut during 2024 is also fully priced in.
– Increases the chance of an interest rate cut
This is exactly the kind of job report the central bank had wanted, says Seema Shah at Principal Asset Management.
– The first payrolls surprise on the downside in several months, in addition to a slowdown in wage growth, will bring the interest rate cut dialogue back into the market, says Shah to Bloomberg.
Shah emphasizes at the same time that this must be the start of a trend for more interest rate cuts this year to become relevant.
Chris Larkin at Morgan Stanley’s E*Trade believes the report probably made the Fed members smile, although he does not think it makes it relevant to cut in June.
– But unless this turns out to be a deviation, it will increase the chance that the Fed will manage to get at least one rate cut this year, says Larkin according to Bloomberg.
The fall in inflation stopped
The American economy has fared better than many expected this year, and unemployment has remained low for a long time.
This despite the fact that interest rates in the USA have been raised sharply in recent years, in the face of high price growth.
Inflation has calmed down a lot since the peak, but the trend has started to point in the wrong direction recently. In March, inflation climbed to 3.5 percent.
The US central bank pointed out in Wednesday’s interest rate decision that there has been a lack of progress towards the inflation target of two per cent.
