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Jul 10, 201409:53 AMOpen Mic

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Market and economic update: U.S. jobs market continues to improve

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The U.S. jobs market continues to improve, adding 288,000 nonfarm payroll jobs in the month of June. In addition, revisions to April and May data added another 29,000 jobs. In June, the unemployment rate slipped 0.2% to 6.1%. The U.S. economy has now surpassed its previous peak of total payroll employment reached in January 2008.

Normalization continues with long-term unemployment, defined as those unemployed for more than 27 weeks, declining as a proportion of total unemployed to 32% from its high of 45.6% in 2010. The average proportion of long-term unemployed averaged just 17% for the 10 years prior to the financial crisis. Average hourly earnings grew 0.2% last month, but longer-term averages indicate earnings growth remains modest. The key for an improvement in the U.S. economic expansion remains in capital spending trends, which have seemed modest at this point. The coming weeks will bring the second quarter earnings season, which should offer some indication of corporate spending plans.

Global Purchasing Managers Index (PMI) data last week showed manufacturing activity is supporting global economic growth. Data indicate global economic activity seems to be led by the United States and United Kingdom, with recovery continuing in Europe. Data for Asia started to improve in June, with Japan recovering from weakness due to a consumption tax increase and activity in China and India starting to perk up from its malaise.

These data are consistent with our view of a recovering global economy. Easy monetary policies in the United States and United Kingdom continue to support strong PMI data, while strong monetary policy in Japan is helping their PMI recovery from higher taxes. The eurozone activity continues to stumble along, with the deleveraging in the core economies of France and Germany slowing their growth while peripheral economies, such as Ireland and Spain, see improving manufacturing activity. Emerging market economies generally saw improving PMI data in June, with the HSBC China Index reaching expansion for the first time in 2014.

(Continued)

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