US payrolls jobs increase of 287K - ING

Rob Carnell, Chief International Economist at ING, notes that the US headline figure of +287K payrolls (jobs) growth is the clear story in this labour report, but important questions remain unanswered about the lack of wages growth, and market pricing of the Fed

Key Quotes

“Rightly or wrongly, the payrolls part of the monthly US labour report is the usual focus of financial markets. This month, that pre-occupation seems well placed, with the 287,000 increase in jobs way in excess of the consensus forecast of +180,000 (ING f +200,000).

But there are important questions still unanswered about wages growth, which rose only slightly to 2.6%YoY from 2.5%YoY, in a month where base effects should have taken this to at least 2.7%, even if only for a month.

We are less concerned that the unemployment rate pushed back up to 4.9% in June from 4.7% in May. Highly volatile labour force participation figures make this a choppy figure at the best of times. And this could be described as a "good" rise in the unemployment rate as more people returned to the labour force in search of work, albeit largely unsuccessfully so far..

Market expectations for the Fed have reacted to these figures. We wrote recently that we felt market pricing was far too gloomy. Having fully priced no rate hikes in by the end of 2017, markets have brought forward a couple of months to 4Q 2017. This still seems on the gloomy side to us. The US economy appears to be in pretty good shape, and we remain happy with our forecast for a next hike in 1Q17.”