This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/live/2016/jun/03/markets-await-services-data-for-clues-on-uk-economy-business-live

The article has changed 15 times. There is an RSS feed of changes available.

Version 9 Version 10
Shock US jobs report as payrolls growth lowest for more than 5 years - business live Shock US jobs report as payrolls growth lowest for more than 5 years - business live
(35 minutes later)
3.59pm BST
15:59
A week ago Federal Reserve chair Janet Yellen was at Harvard suggesting a summer interest rate rise could on the cards. Now, after the poor jobs figures, maybe not:
Window to hike is now closed: "Fed May Go in Sept.; June Seems Off Table, July Too Soon" BofAML
3.47pm BST
15:47
US #PMI surveys point to #GDP growing at an annualised rate of just 0.7-8% in Q2 https://t.co/JjIvanBgPW pic.twitter.com/j79xvTJIeP
3.35pm BST3.35pm BST
15:3515:35
The disappointing US services sector data which followed quickly on from the poor jobs numbers provides another reason for the Federal Reserve to leave rates unchanged this month, says James Smith at ING Bank:The disappointing US services sector data which followed quickly on from the poor jobs numbers provides another reason for the Federal Reserve to leave rates unchanged this month, says James Smith at ING Bank:
After May’s non-farm payrolls plummeted, the ISM Non-manufacturing came crashing back down to 52.9 from 55.7, much lower than expected. Aside from supplier deliveries, the other main components that contribute to the headline recorded fairly sizable falls (employment and business activity), particularly new orders, where the size of the month-on-month drop was the largest since November 2008. This is especially concerning, given that in theory it sets the precedent for (or “leads”) future business activity.After May’s non-farm payrolls plummeted, the ISM Non-manufacturing came crashing back down to 52.9 from 55.7, much lower than expected. Aside from supplier deliveries, the other main components that contribute to the headline recorded fairly sizable falls (employment and business activity), particularly new orders, where the size of the month-on-month drop was the largest since November 2008. This is especially concerning, given that in theory it sets the precedent for (or “leads”) future business activity.
Although the ISM surveys are perhaps not the most central part of the Federal Reserve Open Market Committee reaction function, the magnitude of the fall means that it will probably feature in the debate over near-term policy. Indeed, given that the US recession story has faded away over recent weeks, it is possible that the combination of today’s weak non-farm payrolls figure and the drop in the ISM Non-manufacturing prompts the debate to resurface to some degree over coming weeks. Either way, it is another reason for the FOMC to leave rates unchanged in June, with focus now on Chair Yellen’s speech on Monday to see how the latest data will affect policy in coming months.Although the ISM surveys are perhaps not the most central part of the Federal Reserve Open Market Committee reaction function, the magnitude of the fall means that it will probably feature in the debate over near-term policy. Indeed, given that the US recession story has faded away over recent weeks, it is possible that the combination of today’s weak non-farm payrolls figure and the drop in the ISM Non-manufacturing prompts the debate to resurface to some degree over coming weeks. Either way, it is another reason for the FOMC to leave rates unchanged in June, with focus now on Chair Yellen’s speech on Monday to see how the latest data will affect policy in coming months.
3.11pm BST3.11pm BST
15:1115:11
Still, US factory orders were more or less in line with expectations:Still, US factory orders were more or less in line with expectations:
US Factory Orders Data (Apr)Factory Orders M/M +1.9% v +1.9% exp, prev +1.1% rev +1.7%Ex Transportation M/M +0.5%, prev +0.8% rev +1.0%US Factory Orders Data (Apr)Factory Orders M/M +1.9% v +1.9% exp, prev +1.1% rev +1.7%Ex Transportation M/M +0.5%, prev +0.8% rev +1.0%
UpdatedUpdated
at 3.11pm BSTat 3.11pm BST
3.07pm BST3.07pm BST
15:0715:07
US service sector growth slowsUS service sector growth slows
More signs of weakness in the US economy, this time from two surveys of the service sector.More signs of weakness in the US economy, this time from two surveys of the service sector.
First the ISM non-manufacturing PMI fell from 55.7 in April to 52.9, well below the consensus forecast of 55.5. The new orders index at 54.2, down from 59.9, was the lowest since February 2014.First the ISM non-manufacturing PMI fell from 55.7 in April to 52.9, well below the consensus forecast of 55.5. The new orders index at 54.2, down from 59.9, was the lowest since February 2014.
And the final reading of the Markit services PMI for May came in at 51.3, down from 52.8 in April. The index is marginally higher that the first estimate of 51.2 for May.And the final reading of the Markit services PMI for May came in at 51.3, down from 52.8 in April. The index is marginally higher that the first estimate of 51.2 for May.
Meanwhile the Markit composite index - manufacturing and services - fell from 52.4 in April to 50.9.Meanwhile the Markit composite index - manufacturing and services - fell from 52.4 in April to 50.9.
3.03pm BST3.03pm BST
15:0315:03
Here’s a chart showing the jobs numbers:Here’s a chart showing the jobs numbers:
And unemployment rateAnd unemployment rate
2.55pm BST2.55pm BST
14:5514:55
Joey Lake, US analyst at the Economist Intelligence Unit, said:Joey Lake, US analyst at the Economist Intelligence Unit, said:
The jobs report was bad, bad, bad: there is no positive spin to it. Not only was May a particularly weak month, the worst in almost six years, but revisions dragged previous months lower. The unemployment rate declined to 4.7% but that is because of a fall in the labour force participation rate: not what we want to see happening. Overall, the job market has added an average of 116,000 jobs/month over the past three months, a substantial slowdown from the 229,000/month averaged in 2015.The jobs report was bad, bad, bad: there is no positive spin to it. Not only was May a particularly weak month, the worst in almost six years, but revisions dragged previous months lower. The unemployment rate declined to 4.7% but that is because of a fall in the labour force participation rate: not what we want to see happening. Overall, the job market has added an average of 116,000 jobs/month over the past three months, a substantial slowdown from the 229,000/month averaged in 2015.
What is the reason? The Verizon strike certainly weighed on the May numbers, so we can expect a bounce back in June. And as the US approaches full employment, the rate of job creation was always going to slow. This does not seem to be indicative of a broader economic slowdown: in April consumer spending rose by 1%, the largest monthly increase since 2009.What is the reason? The Verizon strike certainly weighed on the May numbers, so we can expect a bounce back in June. And as the US approaches full employment, the rate of job creation was always going to slow. This does not seem to be indicative of a broader economic slowdown: in April consumer spending rose by 1%, the largest monthly increase since 2009.
The labour market slowdown will make the Federal Reserve reconsider its next move. It reduces the chance of a June rate increase and makes it more likely the Fed will wait until July, after the Brexit vote, which will also reduce the political risk from abroad.The labour market slowdown will make the Federal Reserve reconsider its next move. It reduces the chance of a June rate increase and makes it more likely the Fed will wait until July, after the Brexit vote, which will also reduce the political risk from abroad.
2.54pm BST2.54pm BST
14:5414:54
More reaction to the disappointing jobs figures.More reaction to the disappointing jobs figures.
CEBR added its voice to those suggesting a US rate rise in June was now off the table: CEBR added its voice to those suggesting a US rate rise in June was now off the table. Senior economist Alasdair Cavalla said:
[The report] does support our assessment that now is still too early for another rise. The main factor slowing down growth in the US is exports, which is precisely where the impact of tightening will fall most heavily in the form of a stronger dollar. Fed officials have explicitly highlighted a potential Brexit as another downside risk likely to stay its hand in June. This comes on top of a still fragile global economic environment. Today’s news suggests there may be more to worry about than thought. A good year economically is thought to favour incumbent governments; the risk of a protectionist and isolationist administration by the end of the year is hardly going to give firms the reassurance they need to hire and invest. In the absence of any meaningful inflationary threat, raising interest rates in such an environment would be incomprehensible.[The report] does support our assessment that now is still too early for another rise. The main factor slowing down growth in the US is exports, which is precisely where the impact of tightening will fall most heavily in the form of a stronger dollar. Fed officials have explicitly highlighted a potential Brexit as another downside risk likely to stay its hand in June. This comes on top of a still fragile global economic environment. Today’s news suggests there may be more to worry about than thought. A good year economically is thought to favour incumbent governments; the risk of a protectionist and isolationist administration by the end of the year is hardly going to give firms the reassurance they need to hire and invest. In the absence of any meaningful inflationary threat, raising interest rates in such an environment would be incomprehensible.
And:And:
May 27: Yellen says rate hikes in coming months "appropriate"June 3: 38k May payrollsJune 6: Yellen to repeat "appropriate"? Hmmm....May 27: Yellen says rate hikes in coming months "appropriate"June 3: 38k May payrollsJune 6: Yellen to repeat "appropriate"? Hmmm....
Bill Gross: Jobs report is big enough shock for Fed to delay rate hike https://t.co/gAoCAv69t1 pic.twitter.com/Is4b61bkYwBill Gross: Jobs report is big enough shock for Fed to delay rate hike https://t.co/gAoCAv69t1 pic.twitter.com/Is4b61bkYw
And here’s a possible explanation for the shock figures:And here’s a possible explanation for the shock figures:
Maybe everyone went to go and work on farms.Maybe everyone went to go and work on farms.
Updated
at 3.38pm BST
2.50pm BST2.50pm BST
14:5014:50
The weaker than expected US jobs numbers have also sent European markets lower.The weaker than expected US jobs numbers have also sent European markets lower.
Germany’s Dax is now down 0.8% while France’s Cac is 0.78% lower. The FTSE 100 is just managing to stay in positive territory, up 4.5 points.Germany’s Dax is now down 0.8% while France’s Cac is 0.78% lower. The FTSE 100 is just managing to stay in positive territory, up 4.5 points.
The dollar has fallen to a two week low on the basis that the figures make a June rate rise unlikely now, despite the previous hints to the contrary from various Fed members. The dollar index dropped by more than 1% while the euro rose 1.3% and sterling hit a three day high of 1.4544.The dollar has fallen to a two week low on the basis that the figures make a June rate rise unlikely now, despite the previous hints to the contrary from various Fed members. The dollar index dropped by more than 1% while the euro rose 1.3% and sterling hit a three day high of 1.4544.
2.40pm BST2.40pm BST
14:4014:40
US markets open lowerUS markets open lower
Wall Street is down in early trading following those horrible payrolls numbers - the worst in almost six years.Wall Street is down in early trading following those horrible payrolls numbers - the worst in almost six years.
Investors will be weighing up whether it’s plain bad news (weak employment market) or good bad news (US rate hike delayed because of weak employment market).Investors will be weighing up whether it’s plain bad news (weak employment market) or good bad news (US rate hike delayed because of weak employment market).
UpdatedUpdated
at 2.40pm BSTat 2.40pm BST
2.29pm BST2.29pm BST
14:2914:29
The biggest increase in jobs was in the healthcare sector, with 46,000 jobs added in May, while employment in professional and business services was up by 10,000.The biggest increase in jobs was in the healthcare sector, with 46,000 jobs added in May, while employment in professional and business services was up by 10,000.
Mining, manufacturing and construction were among the sectors where jobs fell.Mining, manufacturing and construction were among the sectors where jobs fell.
Economists said a US rate hike in June - previously considered a strong possibility - was now unlikely because of the unexpectedly weak payrolls.Economists said a US rate hike in June - previously considered a strong possibility - was now unlikely because of the unexpectedly weak payrolls.
Paul Ashworth, chief US economist at Capital Economics:Paul Ashworth, chief US economist at Capital Economics:
The 38,000 increase in non-farm payrolls in May, which is still only 73,000 if we adjust for the 35,000 striking Verizon workers, means that a June rate hike from the Fed is now very unlikely.The 38,000 increase in non-farm payrolls in May, which is still only 73,000 if we adjust for the 35,000 striking Verizon workers, means that a June rate hike from the Fed is now very unlikely.
In addition, the gains in the preceding two months were revised down by a cumulative 59,000. A July hike is still possible, but it would require clear evidence of a rebound in June’s payroll figures (and a UK vote to remain in the European Union).In addition, the gains in the preceding two months were revised down by a cumulative 59,000. A July hike is still possible, but it would require clear evidence of a rebound in June’s payroll figures (and a UK vote to remain in the European Union).
That sound you hear is Fed Chair Janet Yellen furiously re-writing her speech that she is scheduled to give on Monday.That sound you hear is Fed Chair Janet Yellen furiously re-writing her speech that she is scheduled to give on Monday.
James Smith, economist at ING:James Smith, economist at ING:
Over recent weeks, the blocks appeared to have been gradually falling into place for another rate hike from the Fed, but the latest labour report has potentially put a large spanner in the works.Over recent weeks, the blocks appeared to have been gradually falling into place for another rate hike from the Fed, but the latest labour report has potentially put a large spanner in the works.
In our opinion, this may well put the final nail in the coffin for a June hike, with confirmation of this potentially coming from Chair Yellen’s speech on Monday.In our opinion, this may well put the final nail in the coffin for a June hike, with confirmation of this potentially coming from Chair Yellen’s speech on Monday.
2.15pm BST2.15pm BST
14:1514:15
Donald Trump has given his verdict on the shockingly weak payrolls numbers:Donald Trump has given his verdict on the shockingly weak payrolls numbers:
Terrible jobs report just reported. Only 38,000 jobs added. Bombshell!Terrible jobs report just reported. Only 38,000 jobs added. Bombshell!
2.12pm BST2.12pm BST
14:1214:12
May’s US jobs numbers were always going to be affected by a strike among Verizon workers, but they do not account for such a huge drop in payrolls (to 38k).May’s US jobs numbers were always going to be affected by a strike among Verizon workers, but they do not account for such a huge drop in payrolls (to 38k).
As Jana Kasperkevic from the Guardian’s New York office explains:As Jana Kasperkevic from the Guardian’s New York office explains:
A strike by 40,000 Verizon workers impacted the numbers, the labor department said, and without the strike the number of jobs added would have been 72,000, which is still less than a half of expect job growth.A strike by 40,000 Verizon workers impacted the numbers, the labor department said, and without the strike the number of jobs added would have been 72,000, which is still less than a half of expect job growth.
That ain't VerizonThat ain't Verizon
2.05pm BST2.05pm BST
14:0514:05
Looking at the detail of the US jobs numbers, wage growth was in line with expectations at 0.2% in May.Looking at the detail of the US jobs numbers, wage growth was in line with expectations at 0.2% in May.
The unemployment rate eased to 4.7% from 5% in April, although the drop was partly explained by people who stopped looking for work and were therefore no longer classed as unemployed.The unemployment rate eased to 4.7% from 5% in April, although the drop was partly explained by people who stopped looking for work and were therefore no longer classed as unemployed.
From the US Labor Department report:From the US Labor Department report:
In May, 1.7m persons were marginally attached to the labor force, little changed from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months.In May, 1.7m persons were marginally attached to the labor force, little changed from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months.
They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.
Among the marginally attached, there were 538,000 discouraged workers in May, essentially unchanged from a year earlier. (The data are not seasonally adjusted.)Among the marginally attached, there were 538,000 discouraged workers in May, essentially unchanged from a year earlier. (The data are not seasonally adjusted.)
Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.Discouraged workers are persons not currently looking for work because they believe no jobs are available for them.
Manufacturing payrolls fell by 10,000 after rising by a (downwardly revised) 2,000 a month earlier.Manufacturing payrolls fell by 10,000 after rising by a (downwardly revised) 2,000 a month earlier.
1.49pm BST1.49pm BST
13:4913:49
US futures dropped after the shock payrolls figures.US futures dropped after the shock payrolls figures.
On the one hand, it makes the prospect of a rate rise at the FOMC’s June meeting less likely. But on the other, it suggests the labour market in the world’s largest economy is weaker than assumed.On the one hand, it makes the prospect of a rate rise at the FOMC’s June meeting less likely. But on the other, it suggests the labour market in the world’s largest economy is weaker than assumed.
Here is the full story from our US team.Here is the full story from our US team.