US Labour Market in Focus Ahead of FOMC

At 13:30 this afternoon, attention will turn to the release of US labour market data, as markets look for further insight into the health of the world’s largest economy. Given that the labour market has been one of the key drivers of inflationary pressure in the US over the last few years, markets will be paying particular attention to the extent to which the figures could impact policymakers ahead of the FOMC on 18th September.

Following last month’s data release, the dollar came under pressure as the nonfarm payroll print showed 144,000 new jobs being posted over the course of the month of July, missing expectations of 175,000. This came well below the rolling year average of 215,000 and marked the lowest figure in three months. Meanwhile, the rate of unemployment also rose unexpectedly to 4.3%, its highest since October 2021. Such a slowdown raised expectations that the Fed may be forced to cut more aggressively than previously forecast, with some even speculating on whether the Fed could conduct an emergency rate cut.

While speculation of an emergency cut subsided, a revision in payrolls data found that there were 818,000 fewer jobs than initially reported in the year ending March 24, indicative of the slowdown in the labour market being much greater than previously thought.

Hence, today’s data release, which includes nonfarm payrolls (where the general market consensus is 165,000), the unemployment rate (forecast 4.2%), and earnings (expected 3.7%), will be eagerly watched.

Emmanuel Macron has played a bold card in appointing Michel Barnier to be French Prime Minister. Monsieur Barnier will be well remembered as the EU’s Brexit negotiator-in-chief, but domestically he’s a long-serving politician who sits on the conservative side of the spectrum – which has angered the far left in France, while being accepted by Marine Le Pen’s far right, as a man who has “never been excessive in the way he has talked about the National Rally and who has never regarded us as beyond the pale.”

The New Popular Front, a left-wing collaboration party, won the largest share of the vote back in July, and to have a PM who doesn’t represent their views is understandably frustrating for them. However, the left had to resort to some incredibly tactical voting to keep Le Pen’s National Rally party from scoring a majority, so no doubt Emmanuel Macron is aware that he has as much, if not more, appeasing to do on the right than he does on the left. There’s also the reality that if France lurched to the left, then Macron’s unpopular but necessary work and pension reforms would almost certainly be undone, leaving him without a legacy and the country with even more fiscal worries.

Barnier has promised “change and clean breaks” when he gets underway, but for now will focus on assembling his new team in time for budget legislation, which is due by October 1st. Assembling a cabinet that manages to appease parties but is aligned enough to get things done will be a hard task, but surely he must have learnt a thing or two during his time across the table from Oliver Robbins, then David Davis, then Dominic Raab, then Steve Barclay, then Sir Tim Barrow, then David Frost as they negotiated Brexit!

The government has tabled plans to abolish hereditary peers in the House of Lords.

Yesterday, the House of Lords (Hereditary Peers) Bill had its first reading in the House of Commons. The bill seeks to “remove the remaining connection between hereditary peerage and membership of the House of Lords; to abolish the jurisdiction of the House of Lords in relation to claims to hereditary peerages; and for connected purposes” and would represent one of the greatest changes to the upper house in years.

In 1999, New Labour abolished the right that all hereditary peers had to sit in the House of Lords, with just 92 of the then 800 hereditary peers retaining their seats.

While the timeline for the second reading in the House of Commons has not been announced, the bill should comfortably pass given the make-up of the Lower House and that it was detailed in Labour’s manifesto.

Polling suggests that such a policy could be popular. For example, in a poll conducted by YouGov in 2021 which asked, “Do you think the House of Lords should or should not continue to have places for hereditary peers?”, only 10% believed that the country should continue to have hereditary peers, against 63% of respondents who held the contrary view.

According to the most recent biannual YouGov poll on the House of Lords, the number of those with “no confidence at all” stood at 39%, well above the 3% who said that they had “a lot of confidence.” A separate YouGov poll also suggested that 53% of respondents believed that there should not continue to be places for Church of England bishops, against just 16% who believed that there should be.