U.S. employment data not strong enough to alter expectations about the timing and pace of Fed hike

U.S. nonfarm payrolls rebounded in April, rising 223k, broadly in line with consensus (228k) expectations. However, there were net downward revisions of 39k to the previous months of payrolls, bringing estimated payroll growth in March to 85k (from 126k) and February to 266k (from 264k). 

"The revision leaves the three-month average gain in payrolls at 191k, down from 317k in Q4, consistent with our view that the pass-through from lower energy prices to activity and employment would begin to fade by the end of the first quarter. We look for monthly payroll growth to average 200-225k over the remainder of the year as economic activity rebounds off another soft Q1." said Barclays 

The unemployment rate declined to 5.4%, in line with expectation, and the U6 underemployment rate fell one-tenth, to 10.8%. Earnings were somewhat soft in this report. Average hourly earnings were up only 0.1% m/m and 2.2% y/y, underperforming market outlook for a stronger rise, while average earnings for production and nonsupervisory employees were up 0.1% m/m and 1.9% y/y. 

"We see this report as reducing concerns that weak Q1 growth represents a loss of economic momentum, but the report is not strong enough, in our view, to alter market expectations about the timing and pace of the rate hike cycle. We continue to look for the first rate hike in Sept." adds Barclays