US employment report better, but not great

Although non-farm payrolls increased by a relatively healthy 223,000 and the unemployment rate edged down to a seven year low of 5.4%, April's employment report was otherwise something of a mixed bag. All things considered, any lingering possibility of a June rate hike from the Fed is now off the table, with September probably the most likely lift-off date now.

Mining employment fell by 15,000 in April, and has declined by almost 50,000 cumulatively since the start of this year. The services sectors added a solid 182,000 net new jobs in April, with a third of those jobs created in the highly paid business services sector. Given the encouraging mix of net jobs created, it was a bit disconcerting to see that average hourly earnings increased by only 0.1% m/m in April, with the annual growth rate only edging up to 2.2%, from 2.1%. 

The unemployment rate edged down to 5.4%, from 5.5%, as a 192,000 increase in the household survey measure of employment more than offset a 166,000 increase in the labour force. Even after the downward revisions, the unemployment rate is now very close to the Fed's 5.1% to 5.2% estimated range for the long-run equilibrium rate. It should drop into that range sometime in the second half of this year.

"The 39,000 downward revision to the gains in payrolls in Feb and Mar took the gloss off the rebound in payrolls in April. We may see a further acceleration in employment growth going into the summer, but this isn't the sort of unequivocal rebound that would give the Fed the confidence to begin tightening monetary policy before independence day." said Capital Economics