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America’s labour market had a lousy May


FEDERAL Reserve policymakers have been busily cajoling markets to prepare for an interest-rate rise in the summer. But the news on June 3rd that the economy created a paltry 38,000 net new jobs in May might constitute the kind of unwelcome shock that Janet Yellen, the Fed’s chairman, says would require a change of plan. A rate-rise at the Fed’s next meeting, in June, now looks much too risky. July may also be too soon.

A little over two weeks ago markets put the chance of an interest-rate rise in June at one-in-twenty. But then the Fed released the minutes of its meeting in April, which struck an unexpectedly hawkish tone. The odds of a rise abruptly tightened to one-in-three. Several members of the Fed’s rate-setting committee said in speeches and interviews that rates should rise soon. In a question-and-answer session on May 27th Ms Yellen sent the same message, saying that an interest-rate rise in the coming months looked “appropriate”. The risk of turbulence in financial markets caused by the British referendum on whether to leave the European Union might have stayed the Fed’s hand in June. But a rate-rise by July looked…Continue reading

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