What's going on?
On Friday, the monthly report on how many jobs were created in the US came out. The April jobs figures weren’t horrendous, but they were weaker than expected.
What does this mean?
It’s important to remember that one month does not make a trend, but it does suggest that the pace of job growth in the US is beginning to slow. That makes sense: a huge number of jobs have been created in the past few years so it’s not surprising to see the number of new jobs decline (e.g. with so many people employed, the availability of properly trained workers is becoming somewhat of a problem). In sum, it’s probably not as bad as the weak-ish headline figure suggests, but economists and investors will be paying close attention to next month’s report to see if this is the beginning of a downward trend for job growth.
Why should I care?
For you personally: Wages are going up at a decent pace. The average wage for workers in the US has increased by 2.5% in the past year. That means more money in your pocket and more money for you and other workers to spend, for example, at restaurants or going on holiday (in other words, it should be good for companies, including non-American ones like, say, Adidas, that sell goods to consumers). It’s not so good, however, for other companies as wages are typically a big proportion of companies’ costs – so higher wages are eating into profits.
For markets: This news makes it even less likely that the US Federal Reserve (the Fed) will raise interest rates at its June meeting. Following this data release, the market is giving only a 2% chance of a rate increase in June (remember, the health of the economy is a major factor in the Fed’s decision making). That makes the US dollar less likely to go up versus other currencies (Why? Check out an explanation here), which is typically positive for US stocks (one reason is that US companies’ overseas profits are worth more when translated back to dollars if the value of the dollar goes down).