Strongest month of the year for US employment growth
Data released today by the US Bureau of Labour Statistics show that the US economy created 288,000 new jobs over April, significantly up on March’s data and far above consensus expectations of 215,000. At the highest rate since last February, new job creation this month drove the unemployment rate down to 6.3%.
Today’s release will calm any concerns that may have been raised regarding the health of the US recovery by Wednesday’s disappointing data, which showed that the economy registered just 0.1% GDP growth over Q1 2014 on an annualised basis, far lower than expected. Today’s news suggests that Wednesday’s figure was largely weather-driven and that the state of the economy remains robust. The weak Q1 growth has already been reflected in weak employment data from January, with subsequent data much better. Indeed, today’s release also reported revisions to February and March data which raises both figures above 200,000 jobs created each month. This vindicates the decision of the Federal Reserve’s Open Market Committee on Wednesday to continue tapering: judging the recovery is on track despite the weak GDP data, the committee voted to cut the asset purchase programme by a further $10bn per month, meaning it now stands at $45bn.
Separate data released earlier this morning by Eurostat showed that the Eurozone unemployment rate for March 2014 stood at 11.8%, slightly down from last March but unchanged since December. This disappointing performance is in line with the latest economic data regarding Eurozone GDP growth, which was just 0.2% in the final quarter of 2013 and which Cebr expects will struggle to reach 1% for 2014 as a whole after last year’s contraction.
Returning to the US news, Cebr expects that the US asset purchase programme will have tapered to zero by the end of the year, and that the federal funds rate in the US will rise to 0.5% from their current 0.25% in the third quarter of 2015.
