In April, US recorded just 160,000 gains in new jobs, the lowest in seven months and much lower than the trend seen in the past year. The US registered slowdown in job growth following a weak economic growth in the first quarter. As employment is seen as a good indicator of the economy’s employment growth, it does not bode well to have a combination of slower employment growth and also GDP growth, noted Danske Bank.
However, it is not a major sign of concern as nonfarm payrolls can significantly fluctuate from month-to-month; but this might change if the coming reports do not show any recovery, added Danske Bank. The US jobless rate remained at 5%.
Four of the US Fed members had mentioned recently that the door to an interest rate hike in June is open; however, the weak April employment growth appears to have closed it, according to Dankse Bank. Most of the voting FOMC members have a dovish view on monetary policy. Furthermore, Fed chair Yellen had stressed the risks on the downside to the economy, noted Danske Bank.
The US Fed is expected to wait until September to hike the rates that might provide the central bank will additional time to go through the incoming data, added Danske Bank. There is a 10% chance of the Fed hiking rates in June, whereas a below 40% chance of raising rates in September.
Employment in manufacturing was up by 4000, the first rise in two months. Employment in the sector had declined by 45,000 in February-March. Even if the gain of 4000 is quite small, it is optimistic that employment in manufacturing is not declining anymore.
There are certain positive things in the jobs report in spite of the weak growth in employment. The US average hourly earnings was up 0.3% m/m for the second straight month, while the annual growth rate grew to 2.5% y/y. Even though it is still subdued, there has been a rising trend for wage inflation for the last year as the labor market slack has waned. Moreover, average weekly hours grew to 34.5, while the underemployment rate fell to 9.7%.