U.S. labor market conditions and momentum rebound in April, Fed likely to hike in June and September - Barclays

The Barclays Indicator of Labor Market Conditions and the Barclays Indicator of Labor Market Momentum show that the U.S. labor market conditions and momentum rebounded in April. Since the mid-2016, labor market conditions in the U.S. have rebounded steadily and are now consistent with levels last reached in 2006-07. At the average monthly pace of rebound in the past two years, labor market conditions might return to the 2000 peak in around 18 months.

The Barclays Indicator of Labor Market Conditions was up 0.05 index points in April to 0.86, the most robust reading in the expansion and equal to the average level of conditions in the 2006-2007 cycle peak. Factors improving conditions included most variables from the consumer survey, initial claims and hours worked, while participation and survey data gave some offset, stated Barclays.

In April, the Barclays Indicator of Labor Market Momentum recovered sharply in April, driven by initial claims, rapid growth in employment and the rise in hours worked.

The intentions of U.S. Fed reserve to normalize continue to be intact. The recovery in April payrolls might provide the central bank with confidence that the first quarter deceleration in activity was temporary. The Fed is expected to continue viewing the labor market data as hinting that the economy stays at or close to full employment and that monetary policy could best serve the rebound by gradually transitioning from accommodative policy to neutral policy.

“We continue to forecast rate hikes in June and September, and balance sheet run-off in December”, noted Barclays.