FXStreet (Barcelona) – Senior Analyst at Danske Bank, Pernille Bomholdt Henneberg, reviews the US employment data release, and sees the above consensus nonfarm payrolls print at 280K as confirming their view for a September rate hike by the Fed.
Key Quotes
“The US job report for May was strong as 280,000 new jobs were added to employment (consensus 226,000). Net revisions to March and April were also positive at 32,000. This lifts the three month average monthly job growth just above 200,000, which is the pace we believe marks the threshold for a first Fed funds rate hike in September.”
“Average hourly earnings increased 0.3% m/m up from 0.1% m/m last month. This lifted the yearly rate to 2.3%, which is the highest rate since August 2013. The improvement from last month and some indication of a more clear uptrend in wage inflation is important as it would help convince the dovish FOMC members that a 2015 rate hike is warranted.”
“The unemployment rate increased one notch to 5.5% in May, but the increase was due to an rise in the labour force of 397,000, while there was a gain of 272,000 in household employment. The participation rate increased a bit to 62.9% from 62.8%, but overall it has basically been flat for more than six months.”
“Bottom line is that the employment report supports our view, that the Fed will hike in September. This is still earlier, than what is currently priced in the market although today’s strong report resulted in a sell-off in US fixed income markets.”
(Market News Provided by FXstreet)