US: Chances of a September Fed rate hike are reduced slightly - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the big event to kick September off was a non-event as the Non-farm payrolls increased by 151k, a bit less than expected, leaving the 3, 12 and 6-month averages at 232k, 204k and 208k respectively.

Key Quotes

“Focus on the 12 and 60-month averages, which remain incredibly steady and deliver 1.7%annual growth in employment. That’s a more than decent rate: the problem is the disconnect with GDP, which has grown by 1.2% in the last year and at an average speed of 1.8% over the last 5 years. Lack of productivity is the accounting conclusion, lack of capital spending as companies focus on share buy-backs and complex tax-optimisation rather than investment, is the underlying cause. And concern that an uptick in inflation will erode real wage growth and take the shine off consumer spending is the growing fear.

The market legacy of this ‘business as usual’ start to the monthly data calendar was some violent end-of-the-week position-adjustment on Friday but a return to yield-hunting this morning. The chances of a September Fed rate hike are reduced, slightly but the market consensus is still that 1) the Fed will get round to moving before Christmas and 2) It doesn’t really matter because the pace of hikes will be too slow to materially disrupt capital flows.”