As a
crucial August US employment report edges closer, analysts are sounding more
bullish on job creation and focusing on its implications for the Federal
Reserve’s stimulus spending.
A
Reuters poll predicts that 180,000 jobs will have been created outside the
agricultural sector, in Friday’s non-farm payrolls data.
It’s
the last indicator of its kind before the Federal Reserve must decide whether
or not to begin phasing out its quantitative easing bond-buying measures in
September.
Its
Open Market Committee policy making body meets in two weeks, and is widely
expected to start tapering its asset purchase programme then.
With
job creation a crucial test of the US economic rebound, a strong non-farm
payrolls report today could make such a move more likely.
Deutsche
Bank’s strategist Jim Reid thinks the number will beat Reuters forecasts:
DB
economists are expecting +190k on both headline and private payrolls and a
one-tenth decline in the unemployment rate to 7.3%. That said, given the
strength in the two ISM reports that we saw this week, DB’s Joe LaVorgna thinks
that the risk to today’s number is on the upside.
Nick
Beecroft, Chairman of Saxo Capital Markets, is also sounding more confident:
“I’m
expecting non-farm payrolls to increase at around 190-200,000. The unemployment
rate, with any luck, will tick down 0.1 percent. If it hasn’t, it’s probably
because the participation rate has increased – and more people looking for work
is in itself good news.
And
on the outlook for September tapering, Mr Beecroft adds:
I
would say there’s around a 70 percent chance we will see the Fed start tapering
QE in September. The Fed is going to have trouble keeping market expectations
for rate rises in control. It’s going to be very interesting to see how they
manage the damage limitation that they’re facing right now.
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