Following the disappointing US Private Payrolls data release earlier in the week, Friday saw the release of more upbeat Non-farm payrolls data.
The US Labor Department reported on Friday that the US created 390,000 nonfarm jobs in May. Last month’s figure easily surpassed market expectations for an increase of 325,000 new nonfarm jobs created.
There was further cheer in the economic news as April’s data was revised higher to show payrolls increased by 436,000 jobs instead of the 428,000 that had been previously estimated.
When breaking down May’s nonfarm jobs data, the service sector led the way. Last month’s services accounted for 274,000 job creations, with leisure and hospitality leading the way with 84K. Transportation and warehouse also saw a jump with 47,000 jobs added. Elsewhere, the retail trade lost 60.7K jobs and motor vehicles and parts saw a drop of 3,500 jobs.
There was, however, some disappointment in the employment rate. The unemployment rate for May held steady at 3.6%, but market expectations were for a slight decrease to 3.5%.
Wage Inflation Important
Anthony Saglimbene, Ameriprise Global Market Strategist, said:
“What the market is really focused on is average hourly earnings, a tick lower than expected .. The labor market is starting to level off and if we can see wage inflation moderate a bit lower, that’s healthy for the market.”
“If the wage inflation can come down that’s a more healthy dynamic. (This report) gives permission to the Fed to keep going with their rate hikes because the labor market is strong. They can worry more about inflation pressures and less about the labor market.”
“The market is still concerned about wage inflation. Even at 0.3% that’s still a very high rate. The market is reacting to the fact that the Fed does need to continue with the rate hikes. If wage inflation was lower the market reaction could be more positive.”
