US: Moderate and mixed NFP report – Danske Bank

According to analysts at Danske Bank, Friday's April US jobs report was moderate and mixed as non-farm payrolls and wage growth were lower than expected, but the unemployment rate hit a near post-millennial low.

Key Quotes

“The numbers were skewed by the weather and a fall in the size of the labour force. The market reaction was positive. Initially US Treasury yields fell slightly, but as equity markets rallied, rates begun to rise in tandem. EUR/USD tested new lows (1.1912). We expect the Fed to raise rates three times this year with risks skewed towards a fourth hike.”

“Non-farm payrolls came in below market expectations of 193,000 at 164,000. Weather affected payrolls negatively. After six months of hovering at 4.1% the unemployment rate tapped a post-December 2000 low at 3.9%, primarily through a fall in the size of the labour force.”

“Market attention is centred on wage growth, as due to structural reasons the unemployment rate continues to be a biased indicator of business cycle attrition. Alas, average hourly earnings grew below expectations at an annual rate of 2.6%. May average earnings growth was revised down from 2.7% to 2.6%.”