A dramatic slowing in the pace of job creation in the US has effectively reduced the odds of a June interest rate increase to zero and significantly reduced the chance of a July move to less than 30%.

The latest US nonfarm payrolls data, released Friday, showed that the economy created just 38,000 new jobs in May, far below the consensus forecast for 162,000. The bad news continued as revisions to previous months’ reports showed heavy downward revisions with April’s 160,000 revised downwards by 37,000 jobs to just 123,000. The 208,000 read in March was downwardly revised to 182,000.

There was more gloom in the form of the labor force participation rate which drifted lower to 62.6%, pointing to a large number of Americans leaving the workforce.

The number will almost definitely stay the Federal Reserve’s hand when it next meets to set monetary policy in the world’s largest economy next month.

“This is a dreadful jobs report,” said Monica Freeman, chief markets strategist at Monex Financial. “Those commentators suggesting that a long run of strong nonfarm payrolls proved the strength of the economy will likely be heading back to their drawing boards. A miss of this magnitude is deeply troubling and, if the numbers continue to decline at this pace, the Fed may need to rethink its plan to tighten monetary policy altogether.”

Monex Financial, which has maintained its view that the US economic recovery is insufficiently robust to withstand higher interest rates, says its portfolio will continue to focus on assets that do well in an accommodative monetary policy environment.

About Monex Financial
Monex Financial is a privately held, fully independent investment and wealth management leader, with retail operations based in Toronto, Canada and corporate trading division headquartered in Tokyo, Japan.

From our offices in Toronto the capital city of the province of Ontario and financial and business capital of Canada, we serve private individuals and families from N. America to Europe and with our corporate trading division strategically located in Tokyo, Japan, we have unrivalled access to Asia’s high yielding emerging markets, access to corporate resources, private equity and global mergers and acquisitions.

Monex Financial



www.monexfinancial.com

, ,,