There was a lot of important information on the U.S. economy released this week, but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics (BLS) out this morning. Indeed, total nonfarm employment in America rose by 164K payrolls in April, a smaller increase than expected but there was a net upward revision of 30K jobs to the prior two reports. As a result, payroll growth has averaged +208K during the past three months, higher than the 2017 average (+182K) and comfortably above Federal Reserve officials’ estimates for what is needed to keep up with U.S. population gains. Further, this was the 91st consecutive month of job growth in America, one of the longest such streaks in U.S. history.
As for joblessness, the official unemployment rate (U-3) slid to 3.9 percent in April, and the underemployment rate (U-6) fell to 7.8 percent, both of which are at the best levels in almost two decades. With respect to wage growth, average hourly earnings rose by only 0.1 percent last month, worse than anticipated and the previous month’s gain was revised lower. On the bright side, joblessness at cycle lows and nominal wage growth relatively weak together suggest that we have yet to reach full employment, and that the economy therefore still has room to keep growing. Moreover, today’s headline payrolls gain might have disappointed forecasts, but it is still about as good as one should expect this late in the business cycle and is perhaps a sign that much of the slack left in the labor market has been eliminated. More importantly for the markets, today’s job report is likely nowhere near weak enough to derail the Federal Reserve’s plans to continue raising interest rates this year. In fact, the market-implied probability of another hike at the June FOMC meeting rose to 100 percent this morning.
Sources: Econoday, U.S. DoL, Twitter, Bloomberg, CME, FRBSLPost author: Charles Couch