No new jobs in the US

illustration: graph

(05.09.2011) Employment in the US was unchanged in August, and the unemployment rate is stuck at 9.1 per cent. We may get signals regarding new fiscal and monetary stimulus in Obama's and Bernanke's speeches this Thursday. On the same day, Trichet will probably make it clear whether the ECB says "enough is enough" for now.

By Kjersti Haugland

US payrolls were even worse than expected in August: No new jobs were created. Also, employment growth in the two preceding months was downwardly adjusted by a total of 58.000. Admittedly the (now finished) strike involving 45.000 employees contributed to the weak result (those who do not receive pay check are not counted as employed). Unemployment is stuck at 9.1 per cent of the working force. On Thursday Ben Bernanke will speak in Minnesota, and in the wake of Friday's disappointment markets will once again look for signals regarding new measures from the Fed. On the same day, Obama will speak to the Congress, and launch new measures to support the development of the housing and labour market, the two largest obstacles for US growth.

The reactions in the financial markets were as should be expected: Investors fled from risky assets and into "safe havens".
Global stock markets plunged and the prices of US and German government debt rose. The euro weakened on a broad scale. EURNOK has, since January, moved within a stable interval between 7.95 and 7.70, with the exception of the first week in August. It has now broken the lower limit of the interval again, and is currently trading around 7.68. The Norwegian krone has, however, weakened against the dollar, the yen and the sterling. Despite recommendations from many banks lately, due to solid Norwegian growth and a rock-solid fiscal position, the krone is weighed by a lack of liquidity. Investors have experienced, like at Christmas of 2008, that it can be very difficult to reverse positions in such a market. The Swiss Franc, on the other hand, is the forth most liquid currency globally, and a popular alternative for investors seeking a safe European haven. The Franc appreciated after the payrolls release and FX interventions from the Swiss authorities are becoming increasingly likely.

The speedy recovery of the Norwegian labour market during the first half of 2011 has been succeeded by a more stable phase.
The number of persons registered as unemployed and on labour market programmes rose by 1.300 in August. Hence, gross unemployment edged up to 3.3%, from 3.2% in July. Details reveal that the number of vacancies is no longer increasing, and that more people than before show up to seek work. Central bank governor Olsen will give speeches on three occasions this week, and on Friday we get inflation numbers for August.

US financial markets are closed today, due to Labour Day. This week's most important event could be the ECB meeting on Thursday, where we will pay close attention to the signalling regarding further hiking plans. Inflation well above 2 per cent has made the ECB hike twice this year, but with apparent signs that the euro zone growth is stalling the probability of Trichet signalling "enough is enough" in Thursday's meeting has increased. After seven consecutive hikes we expect a softer tone from the Riksbank as well, due to clear signs of a slowdown in the Swedish economy lately. We (as well as consensus) do not expect the Riksbank to hike at this meeting, and we expect the new interest rate path to show a slower hiking pace going forward.

Important European events this week:
On Wednesday the German federal constitutional court of justice will decide whether the financial aid to Greece, Ireland and Portugal are unconstitutional or not. According to Reuters it is not expected that the court will rule in favour of reversing the aid, but that it will demand that the parliament gets a more important role in the shaping of future aid packages. Also, on Friday the Greek authorities will get to know the level of interest from European Banks to participate in the voluntary debt swap agreements outlined on 22 July.