The rest of the employment report should add to the positive message expected from the headline payroll gain. The unemployment rate is likely to drop to a new cyclical low of 5.4%. The labor force has grown at about 100k/month over the past 12 months. Based on this trend, the projected employment gain of 315k certainly seems sufficiently strong to reduce the unemployment rate. The forecast is also supported by the reported decline in the insured unemployment rate which fell from 1.8% to 1.7% in April. On the downside, the Conference Board confidence survey for April showed that jobs are increasingly hard to get, which suggests some upside risk for unemployment. The forecast for a 0.1% drop represents a balance of the aforementioned risks. “Our wage growth forecast is for a moderate 0.2% m/m gain, a little worse than March but in line with the average sequential gains over the past six months Importantly, this would push the year-on-year growth rate in average hourly earnings from 2.1% to 2.34%, the strongest pace since 2009”, Says Societe Generale.The Employment Cost Index figures are expected to release later this week to reveal a similar acceleration.
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