US: Fed June rate hike on despite NFP headline  - Wells Fargo

Although below the recent trend, the job gain of 103,000 in March supports the case for continued consumer spending, said analysts at Wells Fargo. According to them,  job gains and the 4.1%  unemployment rate corroborate the call for a June rate hike from the Federal Reserve. 

Key Quotes: 

“Nonfarm payrolls rose 103,000 in March with the three-month average at a solid 202,000 jobs. Consistent with 2.5-3.0 percent economic growth in the first half of 2018, job gains come with a likely FOMC June rate hike, soon followed by two more in the second half of 2018.”

“Jobs gains appeared broad-based, with most sectors experiencing gains over the month. Manufacturing jobs continue to show forward momentum—up 22,000 in March and up an average of 25,000 over the past three months. Construction jobs took a hit, down 15,000, as weather showed its force here. Over the past three months, aggregate hours worked are up 2.0 percent, annualized, which very solid and consistent with continued growth in personal income and consumption.”

“Nominal average hourly earnings rose 0.3 percent in March and are up 2.7 percent over the year—a touch higher than February at 2.6 percent. The gradual rise in earnings over the past six months signals higher incomes, but also greater pressure on profits as firms continue to have modest top-line pricing power. Longer term, subdued inflation readings and weak productivity numbers suggest limited gains in nominal wage growth.”

“After going on a tear the past two months, labor force participation edged down in March. Beyond the month to month volatility, however, we see encouraging signs from the household survey that point to continued tightening in the labor market.”