U.S. on track for full employment by December

Despite the uptick in the unemployment rate, the labor market is making steady progress toward full employment which should be reached before the end of the year. The uptick in wages fits nicely with our thesis that we are approaching an inflection point on the Phillips curve and we look for hourly earnings growth to accelerate to 2.6% by year-end, said Societe Generale.

The drag from the energy sector is on track to end this summer. The sector has lost 68k jobs to date, about 70% of the expected total cuts, suggesting that we are about two months away from completion. This is consistent with the flattening in rig counts suggests that the oil-related drag on GDP should diminish in Q2 and be over by mid-year. 

The report is consistent with further labour market progress which is one of the Fed's conditions for a lift-off in rates. Activity data is still missing the mark but a solid retail sales data next week likely to ease concern about weak consumption. 

We continue to look for a September lift-off, with four more hikes in 2017 and with tapering of re-investments beginning in Q2 2016, adds Societe Generale.