Aurelia Butler

The pace of US jobs growth slowed in August after an unexpected acceleration the previous month and the unemployment rate ticked up, in an encouraging sign for the Federal Reserve as it seeks to cool down the economy.The world’s largest economy added 315,000 positions last month, just above economists’ forecasts. That compares with the downwardly revised 526,000 jobs created in July, which has helped to anchor the unemployment rate at a multi-decade low.Despite August’s gains, the jobless rate edged up 0.2 percentage points to 3.7 per cent.The data, released by the Bureau of Labor Statistics on Friday, underscored the labour market on the whole remains robust, even as the Fed has embarked on its most hawkish monetary tightening since the early 1980s.Economists have expected the pace of monthly jobs growth to slow, especially as most of the losses caused by the coronavirus pandemic have been recouped. But employers are still grappling with widespread labour shortages, meaning they are having to compete fiercely to retain workers and hire new ones.Data released earlier this week indicate there are still roughly two vacancies per unemployed worker, indicating little softening of the extremely tight labour market.As such, wages nationwide have risen significantly, sparking concerns of a feedback loop whereby companies are forced to charge more for their products and services to cover these expenses, leading workers to demand even higher pay.Average hourly earnings rose again in August, with wages up 0.3 per cent for the month, or 5.2 per cent on an annual basis. Meanwhile, the labour force participation rate, which tracks the share of Americans either employed or actively looking for work, rose only slightly to 62.4 per cent, still below its pre-pandemic level.

For US central bankers, the resilience of the labour market emphasised just how much more monetary tightening will be necessary in order to sufficiently cool the economy down.Confronted by the worst inflation in four decades, the Fed is debating how high to raise interest rates and for how long to keep them at a level that actively restrains economic activity.The August jobs data help to inform whether the Fed will proceed with a third consecutive 0.75 percentage point interest rate increase at its policy meeting later this month, or move to half-point increments. In just four months, the target range of the federal funds rate has jumped from near zero to between 2.25 per cent and 2.50 per cent.Most officials see rates rising to at least 3.5 per cent this year, with additional increases expected next year.In his most hawkish remarks to date, chair Jay Powell pledged last week that the central bank would “keep at it” until it has restored price stability, admitting that the process is likely to involve a sustained period of lower growth, higher unemployment and “some pain” for households and businesses.

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LONDON (Reuters) – Calls for an unprecedented jumbo 75 basis point lift to interest rates from the European Central Bank next week are on a knife’s edge as inflation soars although a very slim majority of economists said it would be tamer, a Reuters poll found.Late to the rate-setting cycle compared to its peers despite rocketing inflation the ECB didn’t start raising borrowing costs until July when it made its first increase in over a decade. Falling behind has put increasing pressure on the euro, now trading below parity to the U.S. dollar. The ECB surprised many in July with a larger than expected 50 basis point lift, the biggest move in over two decades, taking the refinancing rate to 0.50%.But that clearly was just the beginning, with inflation in the euro zone running at more than four times the Bank’s 2% target, reaching a record 9.1% last month.Yet now the ECB faces the prospect of raising rates aggressively just as the economy is almost certainly entering recession, with the probability of one within a year a median 60% compared with 45% in a July poll.Just under half, 30 of 61 economists in the Aug. 29-Sept. 2 poll, were expecting a 75 basis point increase on Thursday while 27 said the Bank would deliver 50 basis points. Only four expected a modest quarter-point hike.Among euro zone market makers, there was a majority for a 75 basis point move, 18 of 26. Indeed, financial markets are now pricing in the jumbo move and over the last few days a slew of economists have changed their view to 75.The United States Federal Reserve has already made a 75 basis point lift and the Bank of Canada jacked up its key rate by 100 basis points in July and will likely add another 75 next week.At the central bank conference in Jackson Hole, Wyoming, and subsequently, ECB policymakers have called for decisive and swift action to combat inflation, making clear the choice at next week’s policy meeting would be between 50 and 75 basis points.”This remains a very close call – the debate is highly complex, but the mix of recent communication paired with the August upward surprise in headline, and especially core inflation, means a bigger move than in July has now become marginally more likely,” noted Ruben Segura-Cayuela, Europe economist at BofA.Over half of respondents, 31 of 53, saw a 50 basis point hike at the October meeting, bringing the refi rate to 1.50%, with three expecting another 75 basis point move. Seventeen said 25 basis points while the rest forecast no hike then.A majority of economists, 32 of 53, expected a 25 basis point move in December, with 13 expecting 50 then and one saying 75.Medians in the poll said the refinancing rate would end the year at 2.00%, compared to 1.25% in July’s poll. When asked about the risks to their forecasts were skewed, an overwhelming 35 of 37 said higher than they currently expect. OUTLOOK DARKENSRecent data have painted a gloomy outlook for the economy as consumers feeling the pinch from a deepening cost of living crisis cut spending and it was expected to flatline this quarter.Next quarter it will contract 0.3% and then by 0.2% in early 2023, meeting the technical definition of recession. In July those forecasts were for growth of 0.2% in both quarters. On an annual basis it will expand 2.9% this year before slowing to a paltry 0.4% in 2023. The probability of a recession within a year rose sharply to a median 60%, rising to 70% in the next two years, which given the usual reluctance to forecast a slump well in advance strongly suggests a recession is already under way. The median forecast showed inflation peaking at 9.0% this quarter and next before gradually declining but wasn’t seen at the ECB’s goal across the forecast horizon through next year. In the July poll the Q3 and Q4 forecasts were for 8.5% and 7.8%.But it could peak at 12.0% later this year, the median reply to an extra question suggested although forecasts ranged as high as 17%.(For other stories from the Reuters global economic poll: More

BENGALURU (Reuters) -Canada’s soaring house prices will decline sharply next year, but still not enough to make them affordable as the Bank of Canada is set to continue raising interest rates and keep them higher for longer, Reuters polls showed.Fuelled by near-zero interest rates, already-elevated prices in one of the world’s hottest housing markets have surged over 50% since the pandemic began.The Aug. 12-30 poll of 14 property analysts showed average Canadian house prices would rise 10.3% this year, slower than the current pace of around 11%.Although prices have declined nearly 6% since the BoC started hiking the overnight rate in March, analysts say it will take years for affordability to return, if ever. Average house prices were expected to slump 7.8% next year, significantly more than the 2.2% fall predicted three months ago. If realized, that would be the biggest decline since at least 2005, when the Canadian Real Estate Association started collecting house price data.Five respondents predicted a double-digit fall, as much as 18.2% next year. House prices in Toronto and Vancouver were forecast to drop 8.5% and 7.3% in 2023 after surging 13.0% and 10.6% this year.”The pandemic may not be over but the pandemic-era housing market boom certainly is. And the bottom is likely many months away still as our central bank has more work to do,” said Robert Hogue, assistant chief economist at RBC.Over three-quarters of economists, 20 of 25, who participated in a separate Aug. 26-Sept. 1 poll said the BoC would raise rates by a still-hefty 75 basis points next week after a full percentage point rise in July, taking it to 3.25%. “The BoC’s outsized 100 basis-point rate hike delivered on July 13 threw ice-cold water on the market – disqualifying some buyers from obtaining a mortgage,” said Hogue.”Our expectation for an additional 100 basis-point rate increase over the next two rate announcements… will no doubt keep chilling things.”What is not cooling much yet is consumer price inflation.Despite easing slightly in July to 7.6% from a near 40-year high of 8.1% in June, BoC Governor Tiff Macklem said it would “remain too high for some time,” implying the central bank, which has already raised rates by 225 basis points this year, still has more to do. The BoC was expected to deliver another 25 basis points in October to 3.50%. All 17 economists answering an additional question said the risks were skewed toward a higher peak overnight rate than they currently expect.Seventeen of 21 said once the BoC reaches its peak, it was more likely to hold rates for an extended period than cutting them relatively quickly.That is likely to keep pressure on economic activity, particularly in the rate-sensitive property sector, where prices have gone far out of reach for many people. When asked to rate average Canadian house prices on a scale of 1 to 10 where 1 was extremely cheap, 5 priced about right and 10 extremely expensive, the median forecast of 13 contributors rated it 8. For Toronto and Vancouver, the rating was 10.A median of seven responses on a separate question showed prices needed to fall nearly 18% to be fairly valued. A few said they need to fall much more.”The fact is home prices have been disconnected from incomes and rents for quite some time,” said John Pasalis, president at Realosophy Realty.”Even if benchmark house prices fall another 30% nationally, this will just put prices back to Feb 2020 levels (pre-COVID) which were not affordable at that time, but buyers will also be faced with higher interest rates compared to 2020.”(For other stories from the Reuters quarterly housing market polls:) More

MOSCOW (Reuters) -Russia’s benchmark MOEX stock index climbed to its highest in more than three months on Friday, as investors bet on other companies following Gazprom (MCX:GAZP)’s lead in recommending dividends, while the rouble hovered near the 60 mark against the dollar.Gas giant Gazprom’s board this week recommended the payment of 51.03 roubles ($0.8456) per ordinary share in dividends on the first half of 2022, sending the company’s shares up around 25% and buoying Russian indexes.”Investors seem to have cheered up and hopes that the dividend idea is alive and that other Russian companies will join with Gazprom are gradually moving the market upwards,” said Alexander Arutyunyan, chief economist at Russ-Invest. By 1207 GMT, the rouble-based MOEX Russian index was 1.1% higher at 2,471.9 points, its strongest mark since May 18. The dollar-denominated RTS index was up 0.8% to 1,290.1 points, at a near two-month high. “Investors may want to cash in ahead of the weekend, though we still believe that the iMOEX remains in a growing trend,” said BCS Global Markets in a note. STEADY ROUBLEThe rouble hovered near 60 to the dollar and euro, continuing the steady trade that has characterised the past several weeks, a marked contrast to months of volatility. The rouble was 0.1% weaker against the dollar at 60.37 and had lost 0.5% to trade at 60.19 versus the euro.Promsvyazbank analysts said the rouble would remain in the 60-61 range against the greenback on Friday.Volatility has subsided since it hit a record low of 121.53 per dollar in Moscow trade in March, soon after Russia sent tens of thousands of troops into Ukraine. It then rallied to its strongest in seven years of 50.01 per dollar in June.So far this year, the rouble has been the world’s best-performing currency, buoyed by emergency capital controls rolled out by the central bank in a bid to halt a mass sell-off. This helped to avoid an economic meltdown that many had predicted. However, the central bank said Russian banks had lost a combined 1.5 trillion roubles ($24.86 billion) in the first six months of 2022, disclosing banking sector earnings on Friday for the first time since February.($1 = 60.3500 roubles) More