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US Consumption supported by wage bill

[fxstreet] Non-farm payroll employment decreased 131,000 in July with the loss of 143K temporary Census jobs. The private sector created only 71K jobs. This is disappointing from our standpoint since we were expecting twice this amount of private job creation. However, the July job report must be put into perspective. Private average weekly hours rose 0.3% while private average hourly earnings were up 0.1%. It may seem small numbers at first glance but these apply to 107.7 millions of U.S. private workers. This means that despite the poor headline number, the U.S. wage bill was up a strong 0.5% m/m in July. As today’s Hot Charts shows, with only one month in the quarter, the wage bill is already growing at a 2.3% clip in Q3, meaning no retrenchment in consumption. That said, the 3-month moving average of private job creation slowed down from 150K recently to only 50K in July. To avoid a disinflationary environment, the U.S. economy must create more jobs than the increases in labour force in order to bring back down the unemployment rate. Recent private job creations are simply not high strong enough to achieve this goal. While this morning’s report does not point to a double dip of the U.S. economy, it certainly gives the Fed more reasons to seek further boosting the economy.

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