Sign up for the newsletter: http://on.wsj.com/grandcentralsignup
Highlights
HILSENRATH'S TAKE: JOBS REPORT SEEN CONFIRMING FED'S GROWTH NARRATIVE
The Federal Reserve is working off of two narratives right now. Thursday's U.S. jobs report will inform one but not the other.
The first narrative, its baseline, is built around the first half of the year. It goes like this: The economy stumbled in the first quarter, thanks to one-time shocks including bad weather, port shutdowns on the West Coast, statistical mis-measurement, a sharp drop in the price of oil and increases in the value of the dollar. As officials see it, the economy regained its footing in the second quarter, setting the stage for more robust growth in the second half of the year, continued improvement in the labor market, firming of U.S. consumer prices and at least one increase in the central bank's short-term interest rate.
The second narrative is the spillover narrative from overseas. It is new and Fed officials are still forming their opinions about how it will play out. Greece's default on loans from the International Monetary Fund and its referendum on accepting tough new terms from creditors create unknowns for Europe and financial markets which could disrupt the Fed's resumption-of-growth story. A weakened euro could pinch U.S. exports and put further downward pressure on imported U.S. inflation, giving the Fed pause. Global financial strains could undermine confidence among banks and businesses, further depleting investment and growth. Stock volatility and an economic slowdown in China compound the Fed's global worries. The worries, however, may pass. Greece's debt default drama might well be resolved with creditors in a manner of days.
The jobs report released by the Labor Department Thursday is widely expected to confirm the resumption-of-growth narrative for the second quarter. Analysts expect the government to report that national payrolls increased in June by more than 200,000 for the 15 time in the past 16 months -- the best run of that length and magnitude since the mid-1990s. The jobless rate is expected to be reported down to 5.4% from 5.5%.
If the analysts are right, it will suggest the U.S. economy finished the first half of the year with a solid foundation to weather turbulence from overseas. Fed officials will then need to spend the coming weeks assessing whether spillovers actually materialize and with how much force.
-By Jon Hilsenrath
MORNING MINUTES: KEY DEVELOPMENTS AROUND THE WORLD
Brainard: Little Evidence of Strains in Market Liquidity. Federal Reserve governor Lael Brainard on Wednesday pushed back against industry complaints that post-crisis reforms to financial regulation are reducing market liquidity--the ability to buy and sell securities quickly--and potentially laying the groundwork for another bout of turmoil. Fed governor Jerome Powell last week dismissed the notion that regulatory changes were entirely to blame for the decline in liquidity in fixed-income markets.
Most Dealers Report Deteriorating Liquidity Conditions in Fixed-Income Markets. Most major securities dealers said liquidity conditions in fixed-income markets have deteriorated over the past five years, which they blamed on new regulations, according to the Fed's latest quarterly survey of senior credit officers. Four-fifths of respondents said conditions in secondary markets for nominal Treasury securities had deteriorated since the second quarter of 2010--one-third said conditions had deteriorated considerably--and many also reported a liquidity decline in mortgage-backed securities and bond markets.--Dow Jones Newswires.
ECB Keeps Limits on Emergency Loans to Greek Banks. The European Central Bank on Wednesday maintained its limits on emergency loans to Greek commercial banks, an ECB spokesman said, a decision that will likely keep capital controls in place at least through Sunday's referendum on the country's willingness to meet creditor demands. The ECB also made no changes to the amount of collateral banks must post to obtain the liquidity although the topic was discussed, according to a person familiar with the matter, a day after Greece defaulted on EUR1.55 billion ($1.72 billion) it owed the International Monetary Fund and the country's bailout program expired, leaving Athens with no outside support.
Greek Officials Take Sides on Crucial Bailout Referendum. Greek officials took sides Thursday on a looming referendum on creditors' demands that could decide the country's future, as a top European official warned that Greece doesn't belong in the eurozone if it isn't willing to take up reforms.
Three Scenarios for Greece and the Eurozone .
ECB Raises Number of International Agencies Whose Securities It Buys. The ECB has increased the number of international agencies whose securities it buys as part of its quantitative easing program in a move that underscores the central bank's commitment to the program at a time when the eurozone's recovery could be imperiled by a Greek exit from the eurozone--Dow Jones Newswires.
Sweden's Central Bank Cuts Main Rate, Increases Bond Buys. In a surprise move, Sweden's central bank on Thursday cut its main interest rate and increased its bond buying program as it stepped up its battle to raise inflation amid rising economic uncertainty triggered by the Greek crisis.
Global Inflation Stays Low Despite Stimulus. The annual rate of inflation picked up across the Group of 20 largest economies in May, but remained well below desired levels across developed nations despite a wave of increasingly aggressive stimulus measures from central banks.
Bank of Mexico Reschedules Policy Meetings Around Fed Calendar. Mexico's central bank on Wednesday rescheduled its monetary policy decisions for the remainder of this year so that its meetings follow those of the Fed, given the possibility Mexico will respond to an increase in U.S. interest rates with increases of its own. --Dow Jones Newswires.
GRAPHIC CONTENT
What to Watch in the Jobs Report. The June jobs report will give a snapshot of the labor market six years after the start of the current economic expansion. Since U.S. employment touched a recent low in February 2010, employers have added 12 million jobs. U.S. employment has increased for 56 straight months, despite a rocky expansion that's featured three quarterly contractions.
FORWARD GUIDANCE
-1130 GMT (7:30 a.m. EDT): ECB releases minutes of its June 3 policy meeting
-8:30 a.m. EDT: U.S. Labor Department releases June employment report
-1510 GMT (11:10 a.m. EDT): ECB's Draghi speaks in Milan, Italy
-1630 GMT (12:30 p.m. EDT): ECB's Mersch speaks in Milan, Italy
RESEARCH
Millenials Aren't To Blame for Housing Weakness. The Atlanta Fed's Elora Raymond and Jessica Dill ask whether millenials delayed their first home purchase after the recession and whether they may have been hurt by tighter credit standards. "First-time home purchases by younger buyers peak earlier and persist at an elevated level over a longer period of time than before. We also find, contrary to the popular theory that credit became too tight for millennials to buy homes, that mortgage credit actually became tighter for older first-time buyers than for younger first-time buyers. Taken together, we think these data observations help to explain why the median age of the first-time buyer shifted downwards (instead of upwards) after the housing downturn," they write.
Lagging Wage Growth. The St. Louis Fed's YiLi Chien and Maria A. Arias find that wage growth has lagged overall economic growth since 1972. "Our results suggest that the long-run trend of average wages has consistently failed to keep pace with overall economic growth. In addition, the cyclical component of wage growth seems to play an insignificant role compared with the overall trend. If this trend continues, strong real wage growth may not occur even if economic conditions improve," they conclude.
COMMENTARY
Euro's Salvation Lies in its Political Appeal. Greg Ip writes in the Journal, "The crisis has indeed laid bare the euro's rickety economic architecture. But it has also affirmed its extraordinary political appeal. And that may yet be its salvation. For many Europeans, the euro symbolizes Europe, and as hard as life with the euro has been, life without it looks worse. In Greece and Spain, among the hardest-hit countries during the financial crisis, support for retaining the currency tops 70% in recent polls.
What Went Wrong in Greece. Kenneth Rogoff argues on Project Syndicate that the Greece story shows the difficulties of tying a debt bailout to a wholesale structure change in a country's economic model. "In an ideal world, offering financial aid in exchange for reforms might help those in the country who want to shape it into a modern European state. But given the difficulty Greece has had so far in making the necessary changes to reach that goal, it might be time to reconsider this approach to the crisis completely. In place of a program providing the country with further loans, it might make more sense to provide outright humanitarian aid -- regardless of whether Greece remains fully within the eurozone."
(MORE TO FOLLOW) Dow Jones Newswires
July 02, 2015 07:07 ET (11:07 GMT)
Greece as a Demerging Economy. Marc Champion at Bloomberg View argues that Greece may be making the opposite move that many emerging markets are making. "Greece may need a category of its own as it struggles with unmanageable debt and the prospect of falling out of the euro: That of a "demerging" economy. The idea of emerging economies -- formerly poor, badly run and closed markets that open up and reform to produce rapid catch-up growth -- is well-known," he writes.
BASIS POINTS
Manufacturing Index Up. The Institute for Supply Management's manufacturing purchasing managers index rose to 53.5 in June from 52.8 in May.
Construction Spending Hits Postrecession High. U.S. construction spending advanced 0.8% to a seasonally adjusted annual rate of $1.036 trillion in May, the highest level since October 2008, the Commerce Department said Wednesday.
Japanese businesses trimmed their three-year inflation projections in the three months to June, a Bank of Japan survey showed Thursday, underlining continued skepticism over the central bank's ability to achieve 2% price increases--Dow Jones Newswires.
Global food prices will continue to decline over the next decade as more food is produced than the world needs, according to a new report from the Organization for Economic Co-operation and Development and the UN's Food and Agriculture Organization--Dow Jones Newswires.
SIGN UP: Grand Central, straight to your inbox.
FEEDBACK LOOP: Send us your tips, suggestions and feedback. Write to: Jon.Hilsenrath@wsj.com; Victoria.McGrane@wsj.com; Pedro.daCosta@wsj.com; Michael.Derby@wsj.com; Nell.Henderson@wsj.com; Brian.Blackstone@wsj.com; jason.douglas@wsj.com; Ben.Leubsdorf@wsj.com; Paul.Hannon@wsj.com; Jacob.Schlesinger@wsj.com; Sarah.Portlock@wsj.com; Kate.Davidson@wsj.com; David.Harrison@wsj.com
Follow us on Twitter: @WSJCentralBanks, @NHendersonWSJ, @pdacosta, @Blackstonebrian, @PaulHannon29, @michaelsderby, @vgmac, @wsj_douglasj, @BenLeubsdorf, @JMSchles, @MargitFeher, @ToddBuell, @sarahportlock, @KateDavidson, @d_harrison
SIGN UP: Grand Central, straight to your inbox.
(END) Dow Jones Newswires
July 02, 2015 07:07 ET (11:07 GMT)
#FX
#Forex
#SaleForex
#GrandCentral
#JobsReport
#SeenConfirming
#FedsGrowthNarrative
0 Response to "Grand Central: Jobs Report Seen Confirming Fed's Growth Narrative"
Thanks for give comment.