150508 us employment

Group Economics

US Watch

Macro & Financial Markets Research Maritza Cabezas, +31 20 343 5618

US employers shake off winter effects

8 May 2015  

The labour market has proven mostly resilient. April’s nonfarm payrolls rebounded to 223K after a downwardly revised 85K the previous month. The unemployment rate fell to 5.4% from 5.5%.

This report keeps the Fed on track for a rate hike in September 2015. We do not see faster wage growth as a precondition to Fed tightening, although if this occurred, it would make the FOMC’s decision easier.

Job growth solid, as employers shake off winter effects

Labour market ready for rate hike

The April nonfarm payrolls report was solid, increasing 223K

The Federal Reserve wants to see strong hiring again as it

after a downwardly revised 85K the previous month. The

considers raising short-term interest rates. The Fed looks at a

labour market cooled a bit in the first quarter, averaging 184K.

large set of indicators to determine the health of the labour

This was, however, almost in line with the first quarter of 2014,

market. Labour demand, measured by US Job Openings is

which also suffered a short interruption in job gains during the

rising at post-recession highs. The ratio of unemployed job

harsh winter. The return of strong job creation in April suggests

seekers to job openings is at its lowest levels since November

that employers are shaking off the winter effects. The

2007. Meanwhile, jobless claims have been reporting historical

unemployment rate fell to 5.4% from 5.5%.

lows. The participation rate, however, is taking more time to reflect strength. The share of Americans looking for work

Service-providing employment strong

remains weak, but it edged up in April to 62.8% from 62.7%.

Looking at the details, professional business services added

We think that the labour market is broadly resilient.

62K up from 35K the previous month, closely followed by education and health which added 61K jobs. Construction saw

This report keeps the Fed on track for a rate hike in September

a sharp increase in hiring of 45K compared to the previous

2015. We do not see a higher participation rate or faster wage

month (-9K), this is a sign of improvement in sectors sensitive

growth as a precondition to Fed tightening, although if these

to winter weather. Meanwhile, a stronger dollar continues to

indicators improved this would make the FOMC’s decision

impact manufacturing activity. Job gains in manufacturing

easier.

related activities remained subdued at 1K after reporting no job growth the previous month.

Service-providing employment strong 000’s

Wage growth improves in April

Accomodation and food

Wage growth continued to pick up moderately, but it comes amid other signs that wage growth is picking up. In April, wage growth was up 2.2% from a year earlier, slightly higher than the annual gain of 2.1% in March. On a month-on-month basis

Manufacturing Professional services Health

wages grew 0.1%, down from 0.2% the previous month. Other measures of wage growth, including the employment cost index released last week, which is a broad measure of wage and benefit expenses rose 0.7% in the first quarter, up from 0.5% in the last quarter of 2014.

Government Construction Retail trade 0 Ave. monthly change over one year

Source: Thomson Reuters Datastream

50 ChangeMarch - April 2015.

2

US employers shake off winter effects – 8 May 2015

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