US non-farm payrolls jump past forecasts in April, but not wages?

Monthly non-farm payroll growth stormed past forecasts again, helped by hiring for the US census, but only a bit.

And while the official data showed wage and income growth slowing, some economists were not buying that.

According to the US Bureau of Labor Statistics, hiring jumped by 263,000 in April and the unemployment rate fell by two tenths of a percentage point to 3.6%.

Excluding hiring linked to the census, April non-farm payrolls would have still clocked-in at up by 236,000, Bloomberg reported.

Economists had forecast a 181,000 increase in payrolls and an unchanged rate of unemployment at 3.8%.

To take note of, the drop in the unemployment rate - which is derived from a different survey than the payrolls number - was largely the result of 646,000 people leaving the labour force, not increased employment.

Over time, the findings from both surveys tended to chime, but from one month to the next they often diverged.

NFP readings for the prior two months were revised up by a combined 16,000.

Wage growth slows (or did it?)

Average hourly earnings meanwhile rose by a lower-than-expected 0.2% month-on-month (consensus: 0.3%).

Versus a year ago, wage growth was 3.2% higher (consensus: 3.3%).

Not lost on markets either, the index of aggregate weekly hours - which is roughly akin to a monthly GDP reading - dipped by 0.1% month-on-month, albeit following a very strong reading of 0.5% for March.

Linked to the above, average weekly hours slipped from 34.5 in March to 34.4 in April (consensus: 34.5), which combined with the latest wage figures meant income growth slowed last month.

Hence the downward move in two-year US Treasury note yields, following an initial spike higher, which as of 1346 BST were down by 0.16% to 2.34%, having initially risen to 2.37% on the back of Friday's jobs numbers.

But Ian Shepherdson, chief economist at Pantheon Macroeconomics noted two statistical quirks in the wage data, April was a long month and pay-day for those paid semi-monthly fell outside the survey period, dragging readings down.

Furthermore, the increase in the labour force participation rate observed at the end of 2018 "which had generated a lot of excitement" had now reversed.

"Overall, this is a strong report, but payroll gains can’t continue at this pace. What can continue, though, is the downshift in unemployment, and that means more power to scarce labor and faster wage gains in due course," Shepherdson said.

"No immediate policy implications, but its not hard to imagine that a run of reports like this would eventually prompt something of a rethink at the Fed."

Some background ...

On 26 April, the Department of Commerce reported that US gross domestic product growth had re-accelerated at the start of 2019, with the economy growing at a pace of 3.2%, nearly doubling economists' projections for a pace of expansion of just 1.8%.

To take note, first quarter GDP readings in the US tended to be depressed due to well-known statistical quirks

Friday's jobs data was preceded by figures just the day before showing that US labour productivity picked up to a quarterly annualised rate of 3.6% in the first three months of 2019 and by 2.4% year-on-year, placing it comfortably above the average year-on-year pace observed since WWII of about 2.2%, which served to push unit labour costs lower at a pace of -0.9% on a quarterly basis.

Nevertheless, many if not most economists were projecting that GDP would slow towards 2% by the end of 2019 with the rate of growth in labour productivity sliding back towards a more shorter-term trend-like value of 1.0-1.5%.