U.S. May Payroll Employment Gain Strengthens from April

by Joe Oliver, Forex Trading-Pips

 

U.S. May Payroll Employment Gain 175K, Strengthens from April Action Forex Update: 

  • May 2013 non-farm payroll employment increased by 175,000 in the month following a 149,000 gain in April.
  • The separate household survey indicated that the May unemployment rate rose to 7.6% from the 7.5% recorded in April.
  • Government employment dropped a modest 3,000 thereby implying a private-employment gain of 178,000.
  • The pace of hiring in May managed to strengthen relative to April although the pace is below the 208,000 achieved during the previous six months. This implied that businesses became moderately more cautious about hiring in the spring in the face of the uncertainty surrounding the government sequestration, or forced expenditure cuts, that kicked in March 1. With overall GDP growth seemingly holding up for the first half of 2013, our expectation is that this cautiousness will ease during the remainder of the year. To promote such, the Fed is expected to keep monetary conditions highly accommodative. Asset purchases are likely to be maintained until the fourth quarter of 2013 with the current 0.00% to 0.25% range for the fed funds holding steady until 2015.

nfpMay 2013 payroll employment rose by 175,000 following a downwardly revised 149,000 gain in April (previously reported as 165,000) and an upwardly revised increase in March of 142,000 (previously reported as 138,000). The May gain was slightly stronger than the 163,000 expected within financial markets. The separate household survey showed an even stronger 319,000 gain although this was outpaced by a 420,000 jump in the labour force that pushed the unemployment rate up to 7.6% from 7.5% in April.

The decline in government employment tapered to 3,000 from declines of 8,000 and 12,000 in April and March, respectively. This resulted in private-employment gains of 178,000 in May following increases of 157,000 and 154,000 in April and March, respectively.

Within private-sector employment, all of the strength was in service-producing jobs, which rose by 179,000 following gains of 172,000 and 140,000 in April and March, respectively. Within services, increases in May were relatively broadly based and led by professional and business services (57,000), leisure and hospitality (43,000), retail (28,000), and education and health services (26,000). Employment in goods-producing industries was essentially flat by dropping a negligible 1,000 in the month following a 15,000 drop in April and a 14,000 increase in March. An 8,000 drop in manufacturing was almost fully offset by a 7,000 increase in construction employment.

The overall workweek held steady at 34.5 hours although it rose in the manufacturing sector to 40.8 hours from 40.7 in April. The gain in employment resulted in the index of aggregate weekly hours, which reflects the combined effect of both employment and hours worked, rising 0.1% and retracing the 0.1% drop in April. The average level of this index during the last two months is still up an annualized 1.6% from the first quarter of 2013, which benefitted from earlier monthly gains, although this was down from a 3.6% increase recorded in the first quarter. This trend is consistent with our expectation that GDP growth will moderate to an annualized 1.9% in the second quarter of 2013 from the 2.4% recorded in the first quarter.

The index of average hourly earnings, the principal wage measure in the report, was unchanged in the month and compared to expectations of a 0.2% increase. This resulted in the year-over-year rate holding steady at 2.0%.

The pace of hiring in May managed to strengthen relative to April although the pace is below the 208,000 achieved during the previous six months. This implied that businesses became moderately more cautious about hiring in the spring in the face of the uncertainty surrounding the government sequestration, or forced expenditure cuts, that kicked in March 1. With overall GDP growth seemingly holding up during the first half of 2013, our expectation is that this cautiousness will ease during the remainder of the year. To promote such, the Fed is expected to keep monetary conditions highly accommodative. Asset purchases are likely to be maintained until the fourth quarter of 2013 with the current 0.00% to 0.25% range for the fed funds holding steady until 2015….More at U.S. May Payroll Employment Gain Strengthens from April

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