Welcome to your weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last week.
US jobs growth slows unexpectedly as unemployment rises
US non-farm payroll data for April showed that the US economy added 266,000 jobs in April, down from 770,000 in March, and well below economist’s expectations that one million jobs would be added.
This leaves the unemployment rate slightly higher at 6.1%, with 8.2 million fewer Americans in employment compared to February 2020. The composition of employment shows that leisure and hospitality added 331,000 jobs while other sectors, notably car manufacturing and retailing, lost workers.
As the most likely cause of a sustained increase in inflation, US employment is watched closely by policymakers and market participants for any indications of monetary policy tightening or change to interest rates. April’s results support the view that any tightening remains unlikely for now.
UK MPC keeps interest rates on hold but slows corporate bond buying
The Bank of England’s Monetary Policy Committee voted unanimously to maintain Bank Rate at 0.1%. The committee also voted to reduce the pace of corporate bond purchases, although the target of £895bn was maintained.
In the committee of nine, there was one vote to reduce the total corporate bond buying target by Chief Economist Andy Haldane. And while this doesn’t change the near-term outlook, Haldane’s bullish stance will become more significant as the economy recovers over summer, with pressure to tighten policy likely to grow.
Political news out of the UK showed that support for Boris Johnson and the Conservative party has increased since the general election in 2019. However, financial markets were more concerned with the outcome of elections in Scotland. The Scottish National Party won the largest share of the vote but not the 50% they had targeted to give them a sufficient mandate for a Scottish independence referendum. Following this news sterling rallied to its highest value since 2018.
It was another positive week for equity markets with all major markets rising, except China. The Chinese equity market (as measured by the CSI 300 index) has been weaker in recent weeks following suggestions of tightening liquidity requirements from the People’s Bank of China and evidence of increasing regulatory pressure on Chinese tech firms, notably Alibaba and Tencent. Commodities were generally strong once again, with the copper price reaching a new all-time high for the second week in a row.
Look out for next week’s update, where we’ll be focusing on US inflation and UK economic growth.
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