US: Inflationary details stand out as much as labor market conditions

US: Inflationary details stand out as much as labor market conditions
US: Inflationary details stand out as much as labor market conditions

With the increased sensitivity towards the Fed since the June FOMC meeting, it can be predicted that the details we will follow through the June payrolls report may have reshaping effects in terms of market and tapering considerations. From this perspective; We will also pay intense attention to wage increases in terms of associating them with policy practices rather than headline details such as employment growth and unemployment.   The views of the market in the increase in payrolls are that there may be an increase of approximately 600-700K. The impact of the openings and the rise in the potential of the service sector increase the probability of seeing a high employment growth. Recent flash PMI data showed that employment across the G4 lagged behind output growth as firms struggled to recruit appropriate staff. Therefore, the employment rate, especially in reopened sectors and businesses, is important for healthy growth. Increasing operating capacities should support the increase in personnel, while the employment should increase in parallel in order to maintain the production at a similar pace and to meet the orders. At the same time, the realization of an equally weighted employment distribution in terms of the scale of the enterprises is especially important for the health and sustainability of the smaller enterprises, which had difficulty returning pre-pandemic dynamics. While the unemployment rate is expected to fall from 5.8% in May to 5.7% in June, the current trend of staff shortages may continue to pose challenges going forward. The bumpy course here can continue to be valid. Some indicators suggest that the recession conditions of the pandemic may still apply to specific businesses.   In terms of the inference of the inflation situation, which is important for the quality expansion of the employment market, we will follow the wage increases intensively. While emphasizing the temporary nature of inflation, the Fed and Powell also acknowledge the risk that inflation could be higher than expected. As a matter of fact, inflationary signals seen in PMI and ISM indicators reveal that current price pressures will remain high. However, the long-term inflation picture will also be largely determined by the amount of labor market stagnation and wage growth. Continuous and qualified income growth is important in terms of maintaining the ability to spend and mobility in economic growth. There is an expectation of 0.4% monthly and 3.6% annual increase in wages, confirming the improvement expectations. This will be heavily associated with Fed tapering. Also, given the market's current concerns about premature contraction, it should come as no surprise that any bad news would be been positively received by the market. Kaynak Tera Yatırım

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