Wall Street Reacts To April’s Payrolls: Goldman Sees 90% Odds Of June Hike, Citi Expects Weaker Dollar
by Tyler Durden
ZeroHedge.com
May 5, 2017
With the initial Wall Street reactions to today’s payrolls report coming in, we present readers with two different takes on today’s jobs number.
The first, and far more bullish one, from Goldman’s Jan Hatzius, notes that “the composition of the report was solid with a further drop in the unemployment rate to 4.4%, matching the lows achieved in the last cycle and three tenths below Fed officials’ estimate of its structural rate.” As a result Goldman has increased its June 2017 rate hike probability from 70% to 90%, to wit:
The first is from Goldman, Nonfarm payroll employment increased by 211k in April, moderately above consensus forecasts. The composition of the report was solid with a further drop in the unemployment rate to 4.4%, matching the lows achieved in the last cycle and three tenths below Fed officials’ estimate of its structural rate (4.7%). Average hourly earnings were in line with expectations, but negative revisions to prior months reduced the year-over year rate to 2.5%. We increased our subjective probability that the next hike occurs at the June 2017 meeting from 70% to 90%.
A less upbeat reaction came from Citi’s Todd Elmer who writes that “the strongest signal is for a bit of drift lower in USD” as the “the report is mixed. Headline employment beat, there was a downward revision, unemployment beat expectations, the participation rate declines and average hourly earnings were a bit downbeat, missing on a year on year basis and seeing a downward revision.”
Elmer also argues for a lower dollar because “jobs have been so strong for so long that investors are more concerned with whether there is pass through to wages in terms of implications for Fed policy. Speaking to this release, there was likely some lean in favor of a stronger wages outcome following the recent surprise on ECI, which may exacerbate market disappointment.” That said, For now the dollar is trying to find direction, declining against the EUR and rising against the Yen.
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