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On Friday, all focus of the market was also on the April NFP jobs report. Although Fed/Powell has almost confirmed about +0.50% rate hikes in June and July, the pace of the same in September, November and December will also depend upon the inflation trajectory. Fed will also focus on wage growth to gauge whether wage-price inflation spirals out of control. If wage growth goes higher than productivity, it may cause more elevated inflation. Thus the prime focus of May's NFP job report was on wage growth rather than headline job addition/employment numbers.
On Friday, the latest BLS/NFP establishment flash data shows that the U.S. economy (public and private sectors excluding the farming industry) added 428K jobs in April, above market expectations of 391K against March’s downwardly revised levels of 428K. Although the April job gain marks the 12th straight month above 400K, it eased from February's high 714K, which may be due to saturation and also slowing economic growth amid Russia-Ukraine/NATO geopolitical tensions and sticky inflation. Private nonfarm payrolls in the U.S. (only private establishment/business employees) added 406K jobs in April from March’s downwardly revised 424K, and much above market expectations of 385K, but below ADP figure 479K.
As per the establishment survey, the change in total nonfarm payroll (NFP) employment for February was revised down by -36K to +714K, and the change for February was revised down by -3K to +428K. With these revisions, NFP employment in February and March combined is -39K LOWER than previously reported.
Overall, as per establishment survey data, in 2021, the U.S. public and private sectors have added around 6743K non-farm jobs, at an average monthly rate of 562K which is in line with the Fed’s estimates. Nonfarm employment is still down by around -214Kin Apr’22 from an overall 2020 contraction of -9462K. As per preliminary estimates, the average NFP job additions for Jan-Apr’22 is around 501K, almost in line with Fed’s estimate for the longer-term (goldilocks economy).
In March, NFP job gains increased almost across all sectors, with the largest gains occurring in leisure and hospitality (78K), namely food services and drinking places (44K) and accommodation (22K); manufacturing (55K), mainly durable goods (31K); and transportation and warehousing (52K). Still, that leaves the economy down by 1200K jobs from its pre-COVID level with leisure and hospitality, local government, and education and health services remaining considerably below March’20 levels.
As per the Household survey, which includes non-farm jobs and self-employed persons (including contractors), the U.S. economy has slashed -by 353K jobs (employed persons) in April against an addition of +736K sequentially (March). The average job/employment addition for 2021 was 512K. After April data, the number of employed persons in the U.S. (as per the Household survey) has reached 158105K against pre-COVID (Feb’20) levels of 158735K; i.e. the economy is still short of -630K employed persons from pre-COVID levels.
US Employed Persons
The U.S. unemployment rate was unchanged at 3.6% in April, remaining the lowest since Feb’20 (pre-COVID) and above market expectations of 3.5%. The headline unemployment rate is still slightly higher than Feb’20 (pre-COVID) levels of 3.5%. The nominal number of the civilian labor force decreased by -363K in April to 164046K vs Feb’20 (pre-COVID) levels of 164448K. The nominal number of unemployed persons was 5941K in April, decreased by -11K sequentially but still higher than Feb’20 (pre-COVID) levels of 5717K. If the civilian labor force of 164448K (pre-COVID) at Feb’20 is considered instead of Apr’22 figure 164046K, then Apr’22 unemployment rate would have been 3.9% instead of 3.6%. The labor force participation rate decreased marginally to 62.2% in April from 62.4% sequentially, the lowest in 3-months. The labor force participation rate was 63.3% in Feb’20 (pre-COVID), still higher than Apr’22.
The U.S. Average Hourly Earnings (AHE) growth slows down to +5.5% in April from +5.6% sequentially, and in line with market expectations of +5.5% gains (y/y). On a sequential (m/m) basis, the AHE grew by +0.3% in April from +0.5% sequentially and lower than the market expectations of +0.4%. The AHE for all employees on private nonfarm payrolls in the US increased by +$0.10 to $31.85 in April, while the AHE of private-sector production and nonsupervisory employees rose by +$0.10 to $27.12. The Average Weekly Hours (AWH) for all employees on U.S. nonfarm payrolls was unchanged at 34.6 in April, below market estimates of 34.7.
Ultimately, Average Weekly Earnings (AWE) was $1102.01 in April against $1098.55 sequentially (+0.3%) and $1053.98 yearly (+4.56%). In March, the sequential growth of AWE was +0.2% and the yearly growth was +4.65%. The real AWE growth turns negative and purchasing power of the USD is also declining steadily as inflation (headline CPI) is soaring, which was +8.5% in March, the highest since Dec’1981 (over 40-years).
On Friday, Wall Street Futures, Gold wobbled, but eventually recovered from the low as despite better than expected NFP job additions, wage growth was muted, while headline unemployment number ticks up along with a decrease in the labor force and there is also a surprising decrease in the absolute number of employed persons in April.
Overall, the April job report may be termed as goldilocks rather than blockbusters (hot), which Fed is pursuing after a very much tight labor market, where demand is much higher than supply. If there is a similar Goldilocks job report in the next few months, then-Fed may not hike to +0.75% or even +0.50% in September, November and December and may opt only for +0.25%. This will be less hawkish than earlier expected. Thus there was some relief rally in risk assets, although the market is still skeptical about bigger rate hikes by Fed.
In any way, USDJPY stumbles Monday from around 131.35 to almost 130.00 levels early U.S. session as the April job report and similar Goldilock reports in the coming months may prevent Fed from bigger rate hikes from September amid the easing of wage inflation. Looking ahead, whatever may be the narrative, technically USDJPY now has to sustain over 131.55 for a further rally; otherwise, it will come down again.
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