Research
Tip: To personalise the research list, click the gear symbol above.


Choose type:


Fast Comment USWeak payrolls, but labour market conditions still tightening

  1. Weak employment growth, but labour market conditions still tightening
  2. Wage pressure building
  3. We expect weaker growth and rising unemployment to prompt the Fed to cut rates next year
Weak employment growth, but labour market conditions still tightening
Total nonfarm payroll employment increased by 20,000 in February, the lowest reading in more than a year and well below the consensus expectation of 180,000. While employment gains in February were well below the consensus, it is too early to sound the alarm on the labor market. The modest gain in employment in February, which follows the better-than-expected 311,000 gain in January is a good illustration of the inherent volatility in the nonfarm payroll data. Looking through that volatility, however, the underlying pace of employment growth close to 200,000 per month is stronger than we would usually expect at this late stage in the economic cycle. Unemployment edged down to 3.8 percent from 4.0 percent in January, partly because of the post-federal-shutdown rebound in household employment. The federal employees who did not work during the shutdown were classified as unemployed in January.
Wage pressure building
Wage increases have been slower than could be expected considering the continuing tightening of the labour market. Although wage growth has been trending upward, the pace has been slow. In February, wage growth was 0.4 percent m-o-m, pushing the y-o-y increase up to 3.4 percent from 3.2 percent in January.
We expect weaker growth and rising unemployment to prompt the Fed to cut rates next year
As the impact of past monetary tightening continues to feed through and fiscal stimulus fades, we expect underlying employment growth to gradually slow later this year, resulting in a rebound in the unemployment rate in the second half of 2019. The average monthly gain in payrolls could fall from close to 200,000 in 2018 to between 100,000 and 150,000 later this year. We think the economic slowdown will lead the Fed to cut rates next year.


 

 


Disclaimer

Anders Bergvall

Anders Bergvall

Senior Economist

Thematic analysis and USA

anbe83@handelsbanken.se

Latest analyses

2019-07-01

Aktuell ekonomi

2019-06-27

Macro Comment Sweden

2019-06-17

Macro Comment Sweden