• 225k jobs added in January, 206k in private sector
  • The unemployment rate edged up to 3.6%
  • Wage growth strengthened to 3.1%

US labour markets showed little evidence of softening in early 2020. The 225k jump in employment was a bounce-back after a slower 147k increase the prior month – but even that earlier reading was still a well-above ‘trend’ rate given soft underlying growth in the working age population. The unemployment rate edged up to 3.6% from 3.5%, but that is still right around multi-decade lows and down almost half a percentage point from a year ago. Backward looking employment growth looks a little softer with benchmark revisions (earlier flagged by the BLS) responsible for lowering the job count by about shaving almost 500k jobs from last year’s count on average. But recent trends have been strong. Employment is up 206k per month over the last half year – clearly a pace that, if sustained, would push unemployment lower going forward. And, consistent with tight labour markets, wage growth edged up in January, rising to 3.1% year-over-year from 3.0% in December.

Job markets still leave the current domestic economic backdrop in the US looking solid, and that largely before any effects of reduced trade uncertainty tied to the US-China trade truce of early 2020 has really had a chance to have a significant impact. We still think the pace of economic growth will be increasingly limited by supply-side capacity limitations – the lower unemployment rate is great for workers but makes it more difficult for businesses to hire and grow. The new coronavirus outbreak abroad has created some new risks to the near-term external growth backdrop, but there is little apparent reason for monetary policymakers to consider rate cuts at the moment, and we continue to expect the Fed to sit on the sidelines through 2020.

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