US adds 222 thousand jobs

From the Wall Street Journal:

U.S. employers picked up their pace of hiring in June. Nonfarm payrolls rose by a seasonally adjusted 222,000 from the prior month, the Labor Department said. The unemployment rate ticked up to 4.4% from 4.3% the prior month as more people joined the workforce…..

Job Gains

Source: St Louis Fed & BLS

Forecast GDP for the current quarter — total payrolls * hours worked — is rising, showing an improving economy.

Real GDP Forecast

Source: St Louis Fed, BLS & BEA

Declining corporate profits as a percentage of net value added (RHS) is typical of mid-cycle growth, while employee compensation (% of net value added) is rising at a modest pace. Peaks in employee compensation are normally accompanied by troughs in corporate profits…..and followed by a recession.

US Corporate Profits and Employee Compensation as percentage of Value Added

Source: St Louis Fed & BEA

Average wage rate growth, both for production/non-supervisory and all employees, remains below 2.5% per year. Absence of wage rate pressure suggests that the Fed will be in no hurry to hike interest rates to curb inflationary pressure.

Hourly Wage Rate Growth

Source: St Louis Fed & BLS

Which should mean further growth ahead.

US GDP: Where is it headed?

I originally got this from Matt Busigin (I think). Average Hourly Earnings multiplied by Average Weekly Hours (Total Private: Nonfarm) gives a pretty good indication of where GDP is headed, well ahead of the BEA accounts.

Nominal GDP compared to Average Hourly Earnings of All Employees (Total Private) multiplied by Average Weekly Hours (Total Private Nonfarm)

Remember this is nominal GDP, so the latest (April 2015) figure of 4.38% would need to be adjusted for inflation. Inflation is somewhere between 0.5% and 1.75% depending on how you measure it. The GDP deflator looks like it will come in below 1.0% which would leave us with real GDP of at least 3.38% p.a.

GDP Price Deflator compared to Core CPI

GDP, the Dollar and Treasury yields

Interesting to see how Treasury yields and the Dollar reacted — or failed to react — to the sharp fall in first quarter GDP growth. But first a great summary by Matt Phillips at Quartz:

Move along. There’s nothing to see here.

Well, if you must know, US GDP growth fell to a 0.2% annualized rate, which looks pretty bad.

GDP

We told you it would be bad. How did we know? Windows. If you looked out any of them between January and March you were treated to a slush-bound hellscape of icy misery. Thankfully, spring has sprung. And there are all sorts of indications that US growth is bouncing back.

…interpreting the numbers rather than simply informing readers of the latest “bad news”. Good journalism.

Ten-year Treasury Note yields broke resistance at 2.00%. Not what one would expect if the economy was slowing and the Fed planned to sit on its hands rather than raise interest rates. Breakout above resistance indicates an advance to 2.25%. Recovery of long-term yields, however, is likely to be gradual, with much testing of support before we see a breakout above long-term resistance at 3.00%.

10-Year Treasury Yields

The Dollar Index surprised in the opposite direction, breaking support at 96. Not what one would expect if yields are rising. Breach of support suggests a test of the primary trendline at 92.

Dollar Index