Around the Street

Experts Talk Disappointing Jobs Report, Hungary's Dire Straits


Businessweek.com compiles comments from Wall Street economists and strategists on the key economic and market topics of June 4.

David Wyss and Beth Ann Bovino, Standard & Poor's

Payroll employment rose 431,000 in May, almost entirely because of the hiring of 411,000 Census workers. The overall increase was a bit short of expectations (consensus was 500,000), but the private-sector job increase of 41,000 was well below the 125,000 we had expected. The unemployment rate fell back to 9.7 percent, reversing the April increase, which we had credited to people looking for Census jobs. In May, they got them. Much of the private-sector weakness was caused by the 35,000 drop in construction jobs—especially disappointing given the infrastructure spending we had expected to see from the stimulus bill. Manufacturing employment was up 29,000, about the average of the last two months. Temporary services, usually a good leading indicator of future employment, rose 31,000. Health services were up 13,100. Average weekly hours edged up to 34.2 from 34.1. Average hourly earnings rose 7 cents to $22.57.

Overall, a weaker report than expected, mainly because of construction. The Census jobs are real, and will provide some income to those hired, but they are short-duration and part-time.

Michael Englund, Action Economics

The U.S.jobs report revealed a shortfall in May payroll growth relative to market expectations, though the 431,000 rise for the job count was only modestly short of our 480,000 forecast, with a Census boost of 411,000 that was almost exactly as assumed, alongside a 41,000 private payroll gain that captured the weakness signaled by earlier May labor-market reports. Yet, the workweek rose to 34.2 from 34.1 in April, the hour-worked index posted a solid 0.7 percent May gain, and we saw a big 0.3 percent May rise in average hourly earnings that followed upward back-revisions.

All three upside surprises, and component strength for the factory and mining sectors, have boosted our forecasts for the remaining May economic reports.

Marc Chandler, Brown Brothers Harriman

A combination of ill-thought-out comments by the new Hungarian government coupled with a surge in the Swiss franc is seeing the forint drop like a rock and is seeing credit default swaps on Hungary explode. Many Hungarian mortgages are denominated in Swiss francs and the sharp appreciation of the Swiss franc would likely have weighed on the forint in any event.

However, comments by Hungarian officials that Hungary is not far from Greece's fate simply adds to the market anxiety and talk of default is not helpful. On one hand it might be posturing as Hungary renegotiates its IMF package. On the other hand, the heightened state of anxiety in the capital markets would seem to caution against such inflammatory comments. The market fears another Greece situation. The new government is claiming that the prior government manipulated the data and lied about the state of the economy. Fear is taking a toll.

Meanwhile, newswires report French Prime Minister [François] Fillon claims that he only sees good news in the euro moving to parity with the U.S. dollar, which only adds fuel to the current fire. This seems like malign neglect in contrast to the benign neglect the U.S. is often accused of.


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