Investment Institute
Alertas de mercado

US reaction: Payrolls stay strong

  • 05 Abril 2024 (5 min de lectura)
Payrolls delivered another strong upside surprise, up 303k in March, the 3m-increase remaining at 276k
This strength was not mitigated by downward revisions, the last two months were revised up by 22k
Nor was it offset by weaker household survey employment, this surged by 498k in the latest month
However, unemployment edged lower to 3.8% - in line with expectation – as labour supply also surged by 469k
And earnings trend growth remained controlled, the latest 3m-annualised pace edged to 4.1% from 4.0% in February
Payrolls growth will likely have to be slower if the Fed is to ease in June; but we expect the next two prints before then to deliver that slowdown
And the labour market in general does not yet appear to be adding inflationary pressure judging by wage developments.
We continue to expect the Fed to cut rates in June, but a fourth cut this year is looking increasingly unlikely.

Payrolls for March once again defied expectations posting the third consecutive major upside surprise. Payrolls rose by 303k in March, once again exceeding the consensus (214k) and our own expectations. Exhibit 1 illustrates that March’s rise defied the only indicator that has been even close to tracking payrolls growth over the past 3 years. Unlike in previous month’s where a strong front month was offset by previous revisions, this time February’s initial estimate was only revised down 5k to 270k and January was revised higher by 27k. The 3-month trend increase was basically stable at 276k, but this was the firmest since June last year and an acceleration from the pace set at the end of last year. The acceleration this month came from jobs in the goods industry – manufacturing no longer shedding jobs and a 13k rise in construction jobs. Services job gains were unchanged overall at 190k.

Not only was this month’s strong payrolls gain not tempered by prior revisions, it was also not mitigated by weakness in household employment. This measure rose by 498k in March, leaving the level just 84k lower over the past six months, with the 3-month trend increase moving back into positive territory (+94 vs -299 in February, Exhibit 2). This still leaves some trend divergence between the tow metrics, but it is not as stark as before. The sharp jump in employment was met with a much smaller dip in unemployment, which fell back to 3.8% - in line with expectations - reflecting another strong increase in labour supply – up 469k on the month or 0.28% - the strongest monthly gain since August. In turn this lifted the labour force participation rate back to 62.7%, closer to last summer’s post-pandemic high.

The in-line unemployment rate was matched by an in-line 0.3% monthly increase in March’s total average hourly earnings, which saw the annual rate decelerate to 4.1% and its lowest since mid-2021. The more recent trend 3-monthly annualized growth rate edged higher to 4.1% in March from 4.0% in February, nudged by modest upward revisions to the prior two month rates. The trend in non-supervisory earnings is somewhat weaker, slowing to 3.9% 3-month annualized in March = its weakest since October. We continue to argue that 4.1% is not far from the range of wage growth that the Fed would deem consistent with its inflation target, a range likely to be around 3.5-4.0%.   

Today’s payrolls report is not the be all and end all for the Fed’s expected easing cycle. Indeed the Fed will see two more payrolls reports before June’s meeting – not to mention three inflation prints, starting with next week’s. The continued upside surprise in jobs growth continues to point to an economy still in good health – defying some of the more cautious Fed commentary if any reversals started to emerge. However, from an inflationary perspective, the fact that despite strong jobs growth unemployment has not moved much – still someway from its recent lows – and vacancy rates are still lower (the vacancy-unemployment rate is near a 3 year low) all suggest that the labour market does continue to “come into better balance” as the Fed described at its last meeting. Average earnings deceleration is a further testimony to that. However, the still solid state of the labour market would likely lead the Fed to consider it had more time to consider easing policy and we think a deceleration is likely to be necessary from here for the Fed to deliver a cut in June.

Given market doubts over Fed rate cuts, the reaction to today’s report was predictable, but not excessive. The chance of a June cut was reduced from 92% to just 58%. December went from 90% chance of 3 cuts to just 70%. Meanwhile 2-year and 10-year US Treasury yields rose 6bps to 4.71% and 4.38% respectively and the dollar rose by 0.4% against a basket of currencies. To our minds, markets correctly remain focused on a June cut, but with scant chance of the Fed moving before June and a real risk that it moves later, this risk skew should affect the chances priced for June now. We continue to expect a June move as we expect some deceleration of employment growth over the coming months and expect to see core measures of inflation resume softer growth over the coming months. However, the strength of employment growth, albeit mitigated by stronger labour supply growth has resulted in upside risks to our growth outlook for this year and reduces the chances of the Fed quickening its pace of cuts later this year to total four cuts.     

Exhibit 1: Payrolls defy survey evidence


Source: BLS, NFIB, April 2024

Exhibit 2: Divergence in employment measures unwinds


Source: BLS, April 2024 

Climate change: The economic cost of inaction
Macroeconomía Análisis macroeconómico

Climate change: The economic cost of inaction

  • por David Page
  • 26 Octubre 2021 (5 min de lectura)
Investment Institute
UK reaction: Wage growth hot, but broadly in line with MPC expectations
Macroeconomía Alertas de mercado

UK reaction: Wage growth hot, but broadly in line with MPC expectations

  • por Gabriella Dickens
  • 14 Mayo 2024 (3 min de lectura)
Investment Institute

    Advertencia sobre riesgos

    El valor de las inversiones y las rentas derivadas de ellas pueden disminuir o aumentar y es posible que los inversores no recuperen la cantidad invertida originalmente.

    Volver arriba
    Clientes Profesionales

    El sitio web de AXA INVESTMENT MANAGERS Paris Sucursal en España está destinado exclusivamente a clientes profesionales tal y como son Definidos en la Directiva 2014/65/EU (directiva sobre Mercados de Instrumentos financieros) y en los artículos 194 y 196 de la Ley 6/2023, de 17 de marzo, de los Mercados de Valores y de los Servicios de Inversión. Para una mayor información sobre la disponibilidad de los fondos AXA IM, por favor consulte con su asesor financiero o diríjase a la página web de la CNMV

    Por la presente confirmo que soy un inversor profesional en el sentido de la legislación aplicable.

    Entiendo que la información proporcionada tiene únicamente fines informativos y no constituye una solicitud ni un asesoramiento de inversión.

    Confirmo que poseo los conocimientos, experiencia y aptitudes necesarios en materia de inversión, y que comprendo los riesgos asociados a los productos de inversión, tal como se definen en las normas aplicables en mi jurisdicción.