We saw another good piece of news out of the US today supporting the case for a solid rebound in growth following the disappointment of the first quarter.
Non-farm payrolls expanded +288k in June
with broad-based gains concentrated in business services, manufacturing and
construction. The average work week was
unchanged over the month but with more people in work aggregate hours worked
are rising at around a 4.5% annual pace (3-month annualised), supporting the
story of stronger growth ahead.
Employment growth was also strong in the
household survey which when combined with an unchanged participation rate led
to a decline in the unemployment rate from 6.3% in May to 6.1% in June.
Wages are quickly becoming the most keenly
watched data as the market looks for any hints of when the Fed may start to raise
interest rates. There was nothing in this
data to get excited about. The 0.25% monthly
gain in average hourly earnings was a touch higher than the recent average but
the annual rate remains around 2%.
Our US growth forecasts for the remainder
of this year are dependent on strong consumer spending. While wages remain subdued, that combined
with increasingly solid employment gains still leads to a strong increase in
aggregate consumer income. That in turn bodes
well for GDP growth in the period ahead.