Monday, March 9, 2015

Data Insight: US payrolls

Key points:
  • US payrolls put in another solid month of gains with a rise of +295k in February.  This result gives a 3-month moving average of +288 per month indicating the jobs growth is becoming increasingly sustained.  Furthermore it has also become increasingly broad-based over recent months.
  • Wage growth was soft over the month with average hourly earnings up 0.1% m/m for an annual rate that is still stuck at not much over 2%.  As I’ve said before, surprise at continued low wage growth needs to be tempered with the fact that labour productivity growth in the US in currently trending at around 1% per annum.
  • Solid jobs growth, increasing hours worked (+3.7% yoy 3-month moving average) and continued, albeit modest, wage gains underpin our expectation of solid consumption growth in 2015 and overall GDP of 3.0-3.5% in 2015.
  • The unemployment rate dropped to 5.5%.  This is now at the top end of the Federal Reserve’s range estimate of the trend unemployment rate.  This will give the Fed increasing comfort with the view that their zero interest rate policy will soon be no longer appropriate.
  • Recent inflation outcomes with signs that lower oil prices have had a dampening impact on core inflation has suggested to me that September was the likely starting point for US rate hikes.  This data tells us June is still very much a possibility.