US August NFP miss forecasts, but wage growth picks up

US job growth undershot forecasts last month, when revisions to figures for the prior two months are taken into account, even as wage pressures increased at their fastest clip since June 2009.

According to the Department of Labor, US non-farm payrolls increased by 201,000 in August, following a downwardly-revised print of 147,000 for July and of 208,000 for June.

Economists had forecast a rise of 191,000.

However, payroll growth over the prior two months was revised lower by a combined -50,000, with non-farm payrolls growth for June and July having initially been estimated at 248,000 and 157,000.

That came alongside a rise in average hourly earnings of 2.9% year-on-year (consensus: 2.8%), versus July's pace of 2.7%.

The labour force participation rate meanwhile declined by two tenths of a percentage point to 62.7%, with the rate of unemployment unchanged from the month before at 3.9%, as expected.

ECONOMISTS' REACTIONS

Commenting on the jobs report, Ian Shepherdson at Pantheon Macroeconomics said non-farm payrolls gains averaging over 200,000 in the next couple of months "are a decent bet for the next couple of months at least."

He also dubbed the 0.4% month-on-month rate of increase in average hourly earnings as "startling" because the month had 23 working days, which should have depressed the number to roughly half the prior trend.

"Monthly noise aside, AHE rose 2.8% in the three months to August, compared to 2.5% in the three months to August 2017, so the gradual grind upwards continues," he went on to explain.

"Wages aren't yet rising fast enough to scare the Fed, but the expectation that further gains are in the pipeline, given the lag from falling unemployment, explains policymakers' intentions to keep hiking."

In an initial reaction, the yield on both the benchmark two-year and 10-year US Treasury notes was rising by three basis points to 2.67% and 2.90%, respectively, leaving the so-called yield spread unchanged at 23 basis points.

For his part, Mickey Levy at Berenberg Capital Markets said: "Amid a sustained low unemployment rate and still-moderate wage gains and sustained economic momentum, some Fed participants may consider lowering their estimates of the natural rate of unemployment and nudging up their estimates of economic growth.

"It is too early to declare that the elusive pick-up in wages is here, especially given the possibility of revisions in coming months."

-- More to follow --