U.S. NFP: Mixed Bag with Low Jobs Growth But Also a New Record Low Unemployment

The U.S. non-farm payroll, missed estimates on jobs growth: 98K vs an estimated growth of 174K (The ADP estimated a gain of 263K jobs) in March; and wage growth came at 2.7% in annual terms – as expected. Unemployment rate edged down again to 4.5% — the lowest level in years. Despite the disappointing headline figure, this report still shows the jobs market is tightening.

The U6 unemployment measurement, a broader measure of unemployment, also declined last month to 8.9% — the lowest rate since December 2007. In terms of revisions, there was a total downward revision of 38K for February and January combined.

In March, the rate of U.S. unemployment was 0.2 percent points below the rate recorded in March 2015.

The number of unemployed persons (7.202 million) fell by 326K in March compared to the previous month. And the civilian labor force increased by 145K. In other words, the report showed a gain in number of people participating in the labor force and another drop in the number of unemployed – another indication that people are still entering the labor market and the current monetary policy is still accommodating. Despite these positive signs, the participation rate remained unchanged at 63%.

Finally, wages rose in March compared to February – the hourly earnings reached $26.14 per hour — a gain of 5 cents or 0.2%, month over month – as expected; wages grew at an annual rate of 2.7%, year on year – slightly lower than in the previous month of 2.8%.

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Bottom line

This recent job report is a mixed bag and doesn’t make life any easy for the FOMC. Unemployment is still coming down, but wage growth isn’t picking up and job growth is a bit lower than where the FOMC would have wanted to see it. But again, this low figure could also be just a “one-off” so the next report could confirm whether the Fed has any reason to be concerned. For now,  the markets also seem a bit confused from this report as equities are nearly flat but bonds prices are rising and the dollar is losing steam.

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