US unemployment higher even though more jobs added

In a strange set of circumstances, data out on Friday night showed an uptick in the rate of unemployment even as more jobs were added in July. The results will mean that the Federal Reserve will continue to keep a keen eye on the employment data over the next month before their next policy meeting on 12th September. In Europe, members of Angela Merkel’s coalition government in Germany indicated that they would not obstruct the ECB’s plan to buy government bonds. Meanwhile, New Zealand’s AA credit rating was reaffirmed by Standard & Poor’s citing the ‘resilient economy’.

The US unemployment rate increased in July from 8.2% to 8.3% as the Census Bureau showed that the increase in those getting back into work was less than the rate of the US’s growing population and citizens leaving the labour market. Despite the marginal increase in the official number, a separate survey showed that there were 163,000 jobs added, significantly more than the 64, 000 in June and the estimations of a 100,000 increase according to the Labour Department. What is important though, is the private payrolls which added 172,000 jobs against estimates of 110,000 and as the graph shows, they are back up at the level prior to the recession, highlighting that government roles are lagging. The data saw investors return to optimism with the S&P 500 up 1.9% to a 3 month high. The mixed news means that Federal Reserve Chairman Ben Bernanke and his team will keep a watching brief on the data for the next month before deciding what action, if any, to take at their next policy meeting.

In Europe, members of German Chancellor Angela Merkel’s coalition government spoke of supporting ECB President Mario Draghi’s potential bond purchase program by stating such action would be a ‘wise middle way to resolving the regions debt crisis’, whilst another stated the rescue funds such as the EFSF and ESM ‘were created for a purpose and bonding buying is in the manual’.

Finally, on the home front, Standard & Poor’s affirmed New Zealand’s AA rating whilst also keeping the outlook as stable, stating that the nation’s healthy balance sheet vanquished the country’s private debt burden. It added that the country’s strong political and economic institutions backing decisive policy reform helped retain the outlook. The rating agency was supportive of the government’s aim to return the country back to surplus by 2015 and saw the cash deficit reducing from 8.2% of GDP in 2011 to 7.8% for 2012.

The news saw the risk on sentiment continue with the Kiwi climbing against the Greenback to just under .8200, where it remains this morning, while the Aussie did likewise climbing to 1.0570 and the NZDAUD cross is now around .7750. The NZDEUR continues at elevated levels, where it remains above .6600.

Private payrolls have returned to pre-recession levels