Notes from the Desk – US Jobs Data – Will the Fed Pause the Pause?
Today’s US employment data offered a little bit for everyone. Payrolls crushed expectations, but unemployment ticked higher and wage growth decelerated.
By the Numbers.
- 339k jobs created, crushing the consensus 195k estimate.
- Prior two months of data revised higher by 93k jobs.
- YoY hourly earnings 4.3% vs 4.4% estimate.
- Unemployment rate jumps from 3.5% to 3.7%.
- Hours worked dropped from 34.4 to 34.3.
Both hawks and doves will find something to point to in today’s data.
- The hawks will point out that rate hikes have done little to curb the demand for labour.
- The doves will note that wage growth is slowing down and the unemployment rate is not as low as previously believed.
The discrepancy in the data is due to the numbers coming from different surveys. Payrolls come from surveying employers, while the unemployment rate comes from surveying households. The household surveys tend to be more volatile and over time the two tend to converge. Accordingly, the market will put more weight on the number of jobs created.
The Federal Reserve (Fed) has indicated that they are in ‘pause’ mode. Today’s data puts a 25 bps hike in June or July on the table. Going into the employment numbers, the bond market had factored in some possibility of a hike. With the odds now higher, yields are experiencing upward pressure.