June was an eventful month for the global economy, to say the least. Most recently, the Brexit vote in the UK has caused substantial uncertainty, which banks and businesses definitely don’t like (neither do job seekers, actually).
The end of the month was so consumed by events across the pond, it would be easy to forget that we didn’t begin June with very encouraging economic news either. With only 38,000 jobs added in May, last month’s jobs report was disappointing at best.
May’s jobs numbers were so low that the Federal Reserve was prompted to announce they were tabling an interest rate hike until later in the year. Fed Chair Janet Yellen pointed to the upcoming jobs report as an important driver of the central bank’s thinking on the matter.
The next report will drop on Friday and all eyes are on the new employment numbers—along with any revisions to past numbers. Another disappointing report could constitute a downward trend, but a robust number could indicate that the US economy is bucking the slow growth pattern and that May’s numbers were more of an anomaly.
And in fact, that anomaly is not so out of the ordinary. Basic statistics teach us that every now and then, numbers can come in far below average. If we look back two or three years, there’s a sour jobs number every 15 months or so.
Right now, consensus forecasts have the labor market returning to stronger growth, with 180,000 new jobs expected. That’s in line with our thinking, as we continue to see strong hiring demand from employers in Indeed job postings. However, we’ve seen that in previous months, without corresponding strong jobs report numbers—meaning that job openings aren’t necessarily translating to hires in this economy.
What effect will Brexit have on the US economy?
The UK’s decision to leave the EU has little, if any, immediate consequence for the US economy. The most quickly felt impact is further delay to the Fed’s interest rate increase, which may now be off the table for the rest of the year. This may be a good thing for borrowers, but it comes at the expense of savers who have long waited for higher interest rates.
For the long term, Brexit creates a great deal of uncertainty around European trade and the continued success of the EU. Depending on how the vote is put into practice, the UK leaving the EU could have serious consequences for talent migration, a crucial factor in today’s increasingly specialized and global workforce.
As far as jobs are concerned, we won’t see any Brexit fallout reflected in Friday’s jobs report. The two surveys that the report is based on were conducted before the referendum was held. We’ll have to watch the August report for an indication of how US employers and job seekers reacted to the vote. Firms are generally less likely to hire new workers if they’re unsure of the economic environment of their home country or its trading partners, so that report will be an important signal of business confidence in the face of a changing Europe.
|Nonfarm Payrolls (M/M Change)||38,000||180,000||Forecast may be high, but we should see something much better than last month.|
|Unemployment Rate||4.7%||4.8%||Agree with consensus forecasts.|
|Average Hourly Earnings||0.2%||0.2%||
Agree with consensus forecasts.