NFP missed the consensus in July, but the slowdown was not caused by trade tensions
Last Friday the most anticipated macro-economic news release shown that the US job growth has slowed down in the previous month. The NFP reading came with 157,000 jobs created, while the expectancy was 191,000 jobs. In addition, the private sector created a total of 170k jobs that was less than expected as well, since the analysts have forecasted a creation of 189k new jobs. The numbers are indicating a tightening in the labor market conditions. However, according to Reuters the slowdown in hiring during July is most likely caused by the shortage of workers and not due to trade tensions. At the moment around 6.6 million jobs are still unfilled in the nation, and according to a survey conducted on small businesses, a record number of establishments have reported that they could not find skilled labor.
As per the Beige Book report in July, it is evident that there is a lack of skilled engineers, manufacturing workers, specialized construction, as well as information technology professionals and truck drivers. The shortage of skilled workers is evidently pushing up wages, therefore the average hourly earnings have increased by 0.3% (7 cents) in the previous month and kept the annual increase in wages at 2.7% in July. Furthermore, the wage inflation grew 2.7 percent in the previous month, which was in line with the expectations, while the increase in wages in constantly being monitored for any evidence of weakening labor market and rising pressure on inflation.
From the UK, we have seen weak services PMI readings, where the growth slowed in July more than expected. The HIS Markit UK services PMI is closely monitored as it is observed as a measure of economic activity and in July it has dropped to 53.5 from 55.1 in June, a 3 month low. The slower than expected growth may have an impact in the BoE decision to raise interest rates. Of course, the uncertainty of Brexit negotiations had impacted the new business creation. According to associate director at PMI complier HIS Markit, Mr. Tim Moore, the rising wage pressures and tight market conditions are the major challenge for service sector companies and pushed the service sector back into the slow lane.
Similarly, from the euro zone, the final services PMI dropped in the previous month to 54.2, while the expected was 54.4, showing a slowdown in the euro zone business growth. However, it is not expected that is would alter the decision of the ECB to end a 2.6 trillion euro stimulus program.
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