July 5 2013

June’s non-farm payroll released to show better than expected job creation of 195k jobs added by the world’s largest economy. April and May non-farm payrolls revised higher by 70k combined. US Treasuries fall sharply, while the US dollar gains. Pound hits four-month low…


Powered by Guardian.co.ukThis article titled “US non-farm payroll beat forecasts with 195,000 new jobs – as it happened” was written by Graeme Wearden, for theguardian.com on Friday 5th July 2013 13.27 UTC

5.34pm BST

European markets rattled by US jobs data

What could have been another up day for markets ended in a very different fashion, writes Nick Fletcher.

The better than expected US non-farm payroll figures revived fears that the US may soon end its bn a month bond buying programme, sending markets into negative territory. Continuing concerns about Greece and Portugal did not help. The dollar moved higher, US bond yields rose and gold fell back. As for equities:

• The FTSE 100 finished 46.15 points or 0.72% at 6375.52

• Germany's Dax is down 2.36% at 7806

• France's Cac closed 1.46% lower at 3753

• Italy's FTSE MIB ended down 1.74% at 15,533

• Spain's Ibex fell 1.67% to 7868

• But in Athens the market bucked the trend and added 2.32% to 840

And Wall Street, after soaring higher then falling into the red, is currently on the up, adding 97 points or 0.65%.

On that note, it's time to close up for the evening. Thanks for all the comments and we'll be back on Monday morning.

5.11pm BST

S&P downgrades Portugal

Meanwhile if it's Friday night it must be time for a sovereign downgrade, and here it is (and not exactly a surprise):

The rating remains at BB.

Updated at 5.41pm BST

5.08pm BST

4.05pm BST

Speaking of Greece, foreign minister Evangelos Venizelos has paid a trip to Cyprus today to show solidarity with another bailed-out country. He just tweeted a picture of himself and the Cypriot PM:

Very jolly….

4.04pm BST

Eurozone crisis on hold…

A couple walks past a closed shop in downtown Lisbon July 5, 2013
A couple walks past a closed shop in downtown Lisbon July 5, 2013 Photograph: JOSE MANUEL RIBEIRO/REUTERS

No progress to report in the eurozone, alas, while I was focusing on the US jobs data (see 1.31pm onwards).

Greece: negotations with the Troika over the Greek reform programme continue. Finance minister Yannids Stournaras is understood to be holding talks with top IMF-EU-ECB officials now.

Greece's administrative reform minister, Kyriakos Mitsotakis, could then meet tonight, or tomorrow, to continue negotiations over civil service cuts.

And with Olli Rehn talking about paying Greece's next aid loans in installments (details), the chances of all €8bn being signed off by Monday appears remote.

Portugal: No progress in patching up its coalition, since the prime minister talked about a 'formula' for success last night (see here).

3.49pm BST

Here's our news story on the US jobless data, by my colleague on Wall Street, Dominic Rushe:

US adds 195,000 new jobs in June but unemployment stays at 7.6%

3.47pm BST

US jobs data: reaction

Capital Economics says today's jobs data means the Federal Reserve could start slowing its stimulus package in two months:

Any doubts (or hopes!) that the Fed wouldn’t follow through on its plan to taper QE3 later this year in response to some of the recent weaker activity data were dealt a major blow by the 195,000 increase in payroll employment in June. The resulting 20 basis point leap in 10-year Treasury yields suggests the markets are fast adopting our view that QE3 tapering will begin in September.

Tanweer Akram, vice-president of Fixed Income at ING, agrees:

The decent improvement in employment is likely to induce the Fed to begin moderately tapering its asset purchase program by September of this year, even though the unemployment rate is still high and broader measures of slack in the labor market (such as labor force participation rate, employment to population ratio, and U-6 unemployment rate) remains substantial while inflation is undershooting the Fed’s long-term target.

David Kelly, chief global market strategist at JP Morgan Asset Management, argues that the non-farm payroll shows steady progress:

This morning’s jobs report is the latest confirmation that, despite significant fiscal drag, the American economy continues to expand at a steady pace. With today’s data, payroll job growth has averaged a steady 202,000 since the start of the year.

Despite the strong payrolls number, other areas of the report showed less progress with the unemployment rate steady at 7.6%, with offsetting solid gains in the labour force and employment. In addition, the average workweek unchanged and only 10,000 jobs added in the highly-cyclical area of temporary workers.

Significantly, the average hourly earnings of all private employees rose by 10 cents and are now up 2.2% year over year, the strongest year-over-year gain in almost two years.

Overall, while this morning’s report was by no means a block-buster, it does show a U.S. economy that is steadily moving forward. For the equity market, this should translate into moderate earnings growth supporting higher stock prices. However, the bond market, even after recent increases in interest rates is still priced for an economy that is moving backwards.

Nothing in today’s report should really change the Fed’s timetable for removing quantitative easing and raising short-term interest rates. However, it is important to recognize that bond yields are still not appropriate given this timetable suggesting a continued rough environment for fixed income.”

3.12pm BST

Gold price falls 3%

Gold is, once again, the principle casualty as analysts anticipate an end to the Fed's QE programme — it has tumbled 3% to ,211/ounce. 

Heck of a fall from the heady days of ,900 / ounce in September 2011, as goldbugs anticipated rollicking inflation as central banks printed money with reckless abandon.

3.00pm BST

On the bond selloff….here's a graph from Tradeweb of the US 10-year Treasury bond's yield (a measure of the interest rate on the bond) over the last two years.

US 10-year Treasury yields
Photograph: Tradeweb

It shows how the yield hit record lows in 2012 as investors piled into safe-haven debt, as the Feberal Reserve kept stimulating the economy with bn of bond purchases each month

But the prospect of the Fed tapering (ie, slowing) its stimulus programme has been driving Treasury yields higher for weeks. Today's jobs report is seen as strengthening Ben Bernanke's hand….

2.48pm BST

Wall Street is open, and the Dow Jones industrial average is rising following today's better-than-expected jobs figures.

The Dow is up 83 points in early trading, a rise of 0.57%.

In the bond market, though, the US Treasuries keep being clobbered as traders anticipate an end to the Federal Reserve's bond-buying programe,

2.27pm BST

Non-farm: highlights

A few key points from today's report into the US jobs market.

• There are still 11.8 million people out of work in America, despite 195,000 new jobs being created in June

• The labor force participation rate crept a little higher, to 63.5% from 63.4% in May. That measures the proportion of the population available for work.

• The average number of hours worked rose by 0.2%

• Average hourly pay rose by 0.4%

• Employment rose in leisure and hospitality, professional and business services, retail trade, health care, and financial activities.

Updated at 2.27pm BST

2.14pm BST

Gotta love those revisions (see here). Lorcan Roche Kelly, Chief Europe Strategist at Trend Macrolytics, points out that the Bureau of Labor Statistics has now taken three swings at getting April's job reading correct, first lowering its estimate then raising it again:

2.05pm BST

2.05pm BST

The yield, or interest rate, on 10-year US Treasuries just hit 2.7% — it's highest rate since August 2 2011.

2.04pm BST

Dollar roars ahead

The dollar has been bolstered by the non-farm data — it has gained one and a half cents against the UK pound, to .49. It's also jumped against the yen, to ¥101.

Pound vs the US dollar, July 5
POUNDED. Sterling punged against the US dollar to below .49 when today’s non-farm data was released. Photograph: Thomson Reuters

Updated at 2.04pm BST

1.52pm BST

Read the report yourself

You can see the June non-farm payroll report yourself here (click) on the Bureau of Labor Statistics website.

1.48pm BST

US Treasuries slide after non-farm

US government debt is falling in value following the news that 195,000 new jobs were created in America in June (see 1.31pm onwards).

The yield on a 10-year Treasury bond bond has risen to 2.685%, up from 2.50% last night [yields rise when prices fall].

Wall Street is anticipating that today's employment data means the Federal Reserve will push on with its plans to 'taper' its bond-buying programme (currently bn per month) later this year, and stop it by the summer of 2014.

1.40pm BST

Revisions show stronger jobs creation in Spring

The Bureau of Labour Statistics has also revised its jobs data for the previous two months.

It now reckons that 195,000 new jobs were created in May, from 175,000. And April's non-farm payroll has been raised to 199,000, from 149,000.

1.36pm BST

Jobless rate stays at 7.6%

America's jobless rate hasn't fallen, though — it has stuck at 7.6%, rather than falling to 7.5% as expected. That suggests more people have remained in the labour market rather than giving up the search for work.

Updated at 1.37pm BST

1.31pm BST


BREAKING: The US non-farm payroll comes in much stronger than expected, with 195,000 new jobs created in June.

That's MUCH better than analysts had expected (the concensus was 165,000, as explained here)

Details and reaction to follow….

Updated at 1.37pm BST

1.25pm BST

1.24pm BST

Worth noting that Goldman Sachs predicts that today's non-farm payroll will come in below the consensus of 165,000 new jobs.

Its chief economist, Jan Hatzius, wrote:

We expect a fairly lacklustre employment report for June, with non-farm payroll growth of 150,000, similar to the average of the past three months.

Of course, that prediction was fed into the consensus, so other Wall Street experts are rather more optimistic…

1.20pm BST

Among the swarm of educated, and less educated, guesses for how many new jobs were created in America last month, this one stood out:

12.55pm BST

US unemployment data – what’s expected

With around half an hour to go until the eagerly-awaited US jobless data (1.30pm BST/8.30am New York) here's a brisk summary:

Economists are expecting the Non-Farm Payroll to show that 165,000 new jobs were created across America last month. That excludes the agricultural sector, where hiring can be volatile (thus "non-farm", you see).

However, estimates vary significantly between analysts (as usual).

The US unemployment rate is expected to fall to 7.5%, from 7.6% in May.

• Recent mixed economic data make non-farm hard to call. On the optimistic side, the private sector created 188K jobs in June, according to a survey earlier this week. Less cheerily, though, growth in America's service sector slowed in June,

• We also need to watch out for revisions. The Bureau for Labour Statistics often corrects its previous data, adding or subtracting tens of thousands of jobs from earlier months. That can radically change the picture.

What will it mean for US stimulus measures? Non-Farm Payroll plays a double-role — firstly, it's a measure of the labour market; secondly, it's a guide to whether the Federal Reserve will cut its bond-buying activities this year, and end QE next summer.

A NFP above 165,000 would probably mean the Fed cracks on with its tapering plans. But a weak figure would give it cause to rethink, and perhaps keep stimulating for longer.

Here's what City analysts are saying

Jane Foley of Rabobank:

Very strong data should be good for risk appetite. However, the market’s likely reaction is complicated by the interpretation of what the numbers will mean for the Fed’s decision to taper QE. 

On June 26 the market celebrated the downside revision of US Q1 GDP on the assumption that this would lead to continued QE. This implies that a lacklustre improvement in US June payrolls could conversely fail to offer support to investor sentiment.

Societe Generale:

The Bureau of Labor Statistics' (BLS) update on the employment situation in June will be the first of a trio of such reports that the Federal Open Market Committee (FOMC) will consider in advance of its 17-18 September meeting.

A reversal of May's labour-force induced rise in the civilian jobless rate, combined with yet another above-consensus payroll print, likely will reinforce expectations of an asset-purchase tapering announcement at that time.

Paul Dales of Capital Economics:

The recent survey evidence leaves us content with our forecast that US payroll employment (13.30 BST) rose by around 150,000 in June. That would be slightly smaller than May’s 175,000 gain. The 188,000 rise in the ADP measure of private payroll employment in June and the rebound in the employment index of the ISM non-manufacturing survey in the same month bode well for official payrolls. But the employment index of the ISM manufacturing survey fell to a four-year low. If the alternative household measure of employment and the labour force also both rose by around 150,000, then the unemployment rate would have been stable at 7.6%. A pick-up in jobs growth in the coming months would leave the Fed’s QE3 tapering plans on track.

12.27pm BST

Photos: protests in Athens against public sector layoffs

Greek municipal workers held a protest march in Athens today, against the Troika's demands for thousands of civil servants to be cut.

Municipal workers march in front of the Greek Parliament in Athens on July 5, 2013 after Greek officials have apparently proposed that 4.000 municipal police officers be transferred to the Greek Police force.
Photograph: LOUISA GOULIAMAKI/AFP/Getty Images
Municipal workers  protest in front of the of the Administrative Reform ministry in Athens on July 5, 2013 after Greek officials have apparently proposed that 4.000 municipal police officers be transferred to the Greek Police force.
Photograph: LOUISA GOULIAMAKI/AFP/Getty Images

Marching past the Bank of Greece:

Municipal police march by the bank of Greece in Athens on July 5, 2013 after Greek officials apparently proposed that 4000  municipal police officers be transferred to the Greek Police force.
 Photograph: LOUISA GOULIAMAKI/AFP/Getty Images

11.47am BST

Four hours of talks in Greece later….

International Monetary Fund's (IMF) Deputy Director and Mission Chief to Greece Poul Thomsen (C) leaves the Administrative Reform ministry in Athens July 5, 2013.
IMF mission chief to Greece Poul Thomsen leaving the Administrative Reform ministry in Athens this lunchtime after yet another meeting. Photograph: JOHN KOLESIDIS/REUTERS

Talks between the Troika and Greece's administrative reform minister, Kyriakos Mitsotakis, ended this lunchtime after four hours . There's still there's no breakthrough on whether or not the Greek government has done enough to unlock its next aid payment.

Ministry officials, though, remain positive, telling reporters in Athens that the meeting was held in "a good climate". More talks are scheduled for this afternoon.

As explained at 9.01am, the Greek government is proposing moving thousands of municipal police officers to the main Greek police force, to meet its pledge to cut civil service levels. The troika's response to this idea isn't yet known….

Updated at 11.47am BST

11.22am BST

German industrial data disappoints

Germany's industrial base suffered a surprise slump in orders in May, suggesting that the eurozone's largest economy is in worse shape than throught.

Industrial orders fell by 1.3% in May, month-on-month, following a 2.2% drop in April.

And the decline was driven by a fall in demand within Germany. Domestic orders shrank by 2%, compared with a 0.7% fall from abroad. Consumer goods demand was particularly weak (down 3%) – as people cut back.

10.51am BST

In the markets…

Europe's stock markets are pretty calm this morning, following yesterday's strong rally after Mark Carney and Mario Draghi poured more strong spirits into the punch bowl by promising more loose monetary policy.

The Footsie's higher, as City traders wait for the US jobs data this afternoon:

FTSE 100: up 34 points at 6455, +0.5%

German DAX: up 4 points at 7998, + 0.06

French CAC: down 5 points at 3803, -0.15%

Spanish IBEX: down 44 points at 7957, – 0.5%

Italian FTSE MIB: down 29 points at 15777, – 0.2%

Chris Beauchamp of IG Index sums it up:

European markets took the opportunity to play in the July sunshine yesterday while the Americans were off celebrating Independence Day. Having been under pressure thanks to unexpectedly hawkish US central bankers, traders were delighted that new boy Mark Carney and seasoned veteran Mario Draghi were so obliging yesterday, firing the starting gun on a new lurch higher for major indices.

Attention now shifts back to the US, where those returning bleary-eyed after celebrations will have to wake up fast to cope with non-farm payrolls.

In London the mining sector is holding back the broader market, as the sector succumbs to a degree of profit-taking in the wake of yesterday’s central bank-inspired rally. Corporate data is thin on the ground again today, so non-farm payrolls will be the focus all morning, with traders opting to sit on their hands and await developments.

And the pound continues to weaken against the US dollar – it's now down almost a cent at .498.

10.12am BST

Portugal’s president speaks

And here's the details of that newsflash, via Reuters:

Portugal's president warned on Friday that a negative scenario for the country would be if it failed to return to markets as planned in 2014 due to external events or internal politics.

"The incapacity of returning to the markets in 2014 could even be a result of the troika not being ready to sign off in a positive way on the rescue package," President Anibal Cavaco Silva told a conference.

Analysts have warned that a political crisis that hit the country this week could upset the smooth progress of Lisbon's adjustment programme under a €78bn bailout by the European Union and IMF.

No word yet on how the negotiations between the Portuguese political leaders is progressing, following the 'formula' for stability apparently hammered out last night (see 8.24am).

9.59am BST

Newsflash from Portugal:


No further details yet…

9.29am BST

Pound hits four-month low

Mark Carney, governor of the Bank Of England, attends a monetary policy committee (MPC) briefing on his first day inside the central bank's headquarters on July 1, 2013 in London, England.
Mark Carney, governor of the Bank of England, has hit the ground running. Photograph: Pool/Getty Images

He's not been in the job a week, but the new Bank of England governor has already made his mark on sterling.

The pound hit a new four-month low this morning, dipping below .50 against the US dollar for the first time since the middle of March.

This follows the Bank of England's surprise declaration yesterday that City expectations of an interest rate rise in two years were 'not warranted'.

That announcement, at Mark Carney's first MPC meeting, has wiped more than two and a half cents off the pound since midday yesterday.

As this graph shows, one pound was worth .57 in mid-June, and as much as .62 at the start of 2013:

Pound versus US dollar in 2013, to July 5
Pound versus dollar in 2013. Photograph: Thomson Reuters

As Alice Ross, the FT's currency correspondent flags up, the US dollar is gaining against other currencies in the run-up to the release of the latest American unemployment data (1.30pm BST)

9.01am BST

Greece: Police transfers could seal troika deal

In Greece, the government is hoping that it's found a way to satisfy the demands of the Troika to cut the size of the civil service.

According to the Kathimerini newspaper this morning, the Athens authorities had found a way to meet its pledge to move 12,500 civil servants into a mobility scheme (where they'll be paid less and could be laid off if a new job can't be found).

The solution – transferring around 4,000 municipal police officers into the ranks of the Greek Police (ELAS).

The issue of civil service layoffs is the main stumbling block between the Troika and the Greek government. Without progress, Greece will struggle to get its next aid tranche, worth €8.1bn.

Kathimerini explains:

Sources told Kathimerini that a breakthrough appeared likely as a proposal for the transfer of municipal police staff into the ranks of ELAS had been accepted in principle by the troika.

The initiative would also lead to the release of thousands of police officers from desk jobs and make up for shortfalls in active police units.


The two sides are set to agree on the duration of labor mobility being reduced from 12 months to six or nine, the immediate closure or merger of public organizations and the inclusion of civil service job transfers in the mobility scheme.

More here.

Talks are continuing today, in an effort to get a deal hammered out before eurozone finance ministers meet on Monday….

Updated at 9.03am BST

8.37am BST

French trade data disappoints

France's trade gap widened in May, and weak exports of aeroplanes and other manufactured goods is being blamed.

The French customs office reported that the trade deficit widened to €6bn in May, from €4.5bn in April. While imports were pretty flat (at €42bn), exports slipped by around 4% or €1.7bn (to €36bn) — driven by lower sales of Airbus planes and other transport kit.

Not encouraging for Francois Hollande's government, as it struggles with a recession, record unemployment, and increasingly belligerent ministers.

8.24am BST

Portuguese bond yields tumble

Portugal's borrowing costs are tumbling in early trading, on hopes that the government will avoid collapse.

Traders are eagerly buying Portuguese bonds which were being dumped a couple of days ago. This follows Prime minister Pedro Passos Coelho's statement last night that he'd found a way to rescue his government (but it's not a done deal yet).

The recovery is driving the yield (or interest rate) on Portugal's 10-year bond back below the 7% mark, to levels where borrowing costs are seen as more sustainable.

However, the political situation in Portugal still looks rather unstable, given public opposition to its austerity measures.

Last night, after meetings with his coalition partner, Passos Coelho declared that:

A formula was found to maintain government stability.

Political analysts are cautious, after the days of turmoil that raised the risk that Portugal won't manage to escape its bailout this year.

Antonio Costa Pinto, political scientist at the University of Lisbon, explained:

Even if the coalition doesn’t break, this will certainly leave the government in a fragile state.

Updated at 9.20am BST

8.06am BST

Greece, Portugal, and non-farm payroll

Portuguese Prime Minister Pedro Passos Coelho  says he's found a 'formula' to hold his government together.
Portuguese Prime Minister Pedro Passos Coelho says he’s found a ‘formula’ to hold his government together. Photograph: MANUEL DE ALMEIDA/EPA

Good morning, and welcome to our rolling coverage of the latest events across the eurozone, the financial markets and the global economy.

Today's European coverage could mainly focus on events in Athens and Lisbon.

Portugal may be inching towards resolving the political crisis that rattled the eurozone this week, following negotiations between political leaders yesterday. Last night, prime ministers Pedro Passos Coelho announced that 'a formula' had been found to hold his government together.

We still don't know what it is, but analysts suspect that junior coalition leader Paulo Portas, who quit the government on Tuesday, might 'unresign' and take a more influential role in government policy.

While in Greece, yet more talks will take place between ministers and the Troika of lenders as the Greek government strives to do enough to unlock its next aid tranche…

Today is also dominated by a crucial piece of economic data — America's non-farm payroll.

The benchmark measure of US unemployment has become a key barometer for assessing the state of the world's largest economy. A strong reading will strengthen the chances of the Federal Reserve pushing on with its plans to slow its stimulus progamme this year. But a weak number might just make Ben Bernanke and co rethink….

In the City, traders are still digesting yesterday's promises of low interest rates from the Bank of England and the ECB. We're not expecting a repeat of yesterday's soaring stock markets, though…

Non-farm payroll is released at 1.30pm BST, and it looks like a quiet morning in Europe. But something's bound to turn up….

Updated at 9.20am BST

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In the trading room today: What does the NFP Report Mean for the USD? With the US Non-Farm Payrolls report minutes away, we focus on the big event and explore the scenarios of how this important labor market data could impact the Fed’s monetary policy and the future trend direction of the USD, we list the Top 10 economic events that will move the markets in the week ahead, we examine the consensus forecasts for the upcoming economic data, we analyze the weakness in the EUR/USD currency pair, we take a look at the bearish breakout in the GBP/USD pair, we keep an eye on the resilience of the USD vs JPY, we highlight the market’s reaction to the Bank of England and the European Central Bank interest rate announcements, the German Factory Orders, and the US Employment Situation report, we discuss new forecasts from Deutsche Bank and HSBC, and prepare for the trading session ahead.