U.S. NFP: Another Mixed Bag With Slower Wage Growth

The U.S. non-farm payroll report was a mixed bag: 211K in jobs growth vs an estimated growth of 194K (The ADP estimated a gain of 177K jobs) in April; but the problem was that wage growth came at 2.5% in annual terms – the lowest level since August 2016. Unemployment rate edged down again to 4.4% — another record low in years. The markets don’t really know how to digest this figure as equities  remain relatively flat, gold and silver prices edge up and the 10 year treasury yield is flat.  

The U6 unemployment measurement, a broader measure of unemployment, also slipped last month to 8.6% — the lowest rate in a decade. In terms of revisions, there was a total downward revision of only 6K for March and February combined.

In April, the rate of U.S. unemployment was 0.6 percent points below the rate recorded in April 2016.

The number of unemployed persons (7.056 million) dropped by 146K in April compared to the previous month. And the civilian labor force didn’t move much as it gained another 12K. And in total, the participation rate inched down to 62.9%. So more people exited the labor force despite the drop in both U6 and U3.

Finally, wages increased in April compared to March – the hourly earnings reached $26.19 per hour — a gain of 5 cents or 0.3%, month over month – as expected; but wages grew at an annual rate of 2.5%, year on year – a very disappointing rate.

Bottom line

The latest jobs report should be considered dovish because there is no acceleration in wages and jobs growth is still at a higher than the yearly average pace. This may lead the Fed to turn a bit more dovish and slow down its rate hike pace.

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