The Federal Reserve looks on track to maintain its pace of monetary policy tightening this year after data this morning showed the US unemployment rate hit an 18-year low in May and wages grew more than expected as the economy added 223,000 jobs.
The headline non-farm payrolls figure was up from a downwardly revised 159,000 (previously 164,000) in April, data from the Bureau of Labor Statistics showed, and beat a forecast of 188,000 from economists surveyed by Thomson Reuters.
The unemployment rate dropped to 3.8 per cent from 3.9 per cent - its lowest level since April 2000.
There was more good news in the form of wage growth, with average earnings rising to a 2.7 per cent year-on-year pace in May from 2.6 per cent in April. Month-on-month, wages rose 0.3 per cent, versus a forecast for 0.2 per cent growth.
Job numbers for both March and April came in well below market expectations, but these both followed a very strong February where the 324,000 result came in more than 60 per cent above market expectations.
In the 12 months to the end of April, the US economy has added an average of 190,000 jobs a month.
James Smith, economist at ING think the jobs report will keep the Fed on track to lift interest rates in June, and added that the key positive for the US central bank was the better-than-expected wages growth number.
“This comes as firms appear to be finding it harder to fill positions. The proportion of small businesses finding it hard to fill job openings continues to flirt with all-time highs, while it’s taking around twice as long to fill vacancies than it did during depths of the financial crisis. We think wage growth could test 3% again this year as these skill shortages gradually filter through to the official numbers,” he said.
The US dollar firmed following the jobs data. The DXY index, measuring the greenback against a weighted basket of global peers, was up 0.2 per cent at 94.197, and a touch higher from where it was before the release of the figures. – Copyright The Financial Times Limited 2018
