12 Jan 2016
US: Labour market slack still there – ING
FXStreet (Delhi) - Rob Carnell, Chief International Economist at ING, suggests that the US labour market slack is currently very small and getting smaller every month.
Key Quotes
“Following last week’s strong payrolls release, the Fed has released its updated Labor Market Conditions Indicator (LMCI) up to December 2015.
The Fed’s LMCI has continued to close the gap we arbitrarily set on our cumulative measure at Jan uary2008, but progress has been slow. The December payrolls reading was strong, but some of the other parts of the survey that feed into the LMCI – hours worked, part time employment for economic reasons and so forth, did not make any noticeable progress.
The 2.9 point improvement published for the LMCI in December is within the 2-3 point range of improvement registered over the last three months. And at this rate, it will take another 10-12 months to totally eradicate the remaining slack back to January 2008 levels. This slow progress could be one reason why the wages component of the labour report has not picked up more substantially in recent months, and continues to disappoint.
For the Fed, even though the remaining slack is minute, the mere existence of slack provides an excuse for not rushing the next step in the normalisation process. We continue to think that the next rate hike will not occur until June, and that thoughts of a March hike are premature.”
Key Quotes
“Following last week’s strong payrolls release, the Fed has released its updated Labor Market Conditions Indicator (LMCI) up to December 2015.
The Fed’s LMCI has continued to close the gap we arbitrarily set on our cumulative measure at Jan uary2008, but progress has been slow. The December payrolls reading was strong, but some of the other parts of the survey that feed into the LMCI – hours worked, part time employment for economic reasons and so forth, did not make any noticeable progress.
The 2.9 point improvement published for the LMCI in December is within the 2-3 point range of improvement registered over the last three months. And at this rate, it will take another 10-12 months to totally eradicate the remaining slack back to January 2008 levels. This slow progress could be one reason why the wages component of the labour report has not picked up more substantially in recent months, and continues to disappoint.
For the Fed, even though the remaining slack is minute, the mere existence of slack provides an excuse for not rushing the next step in the normalisation process. We continue to think that the next rate hike will not occur until June, and that thoughts of a March hike are premature.”