US: Tech employment remains strong

By 10th June 2019The US

The May payrolls report appears to have vindicated the dovish bets on a Fed rate cut at its next meeting. The slowdown so far this year has been broad based across industries. Professional & technical services – a major driver of the positive, structural changes underway in the US – are nevertheless still showing robust employment growth.
Labour costs remain subdued. Revisions pushed the y/y rate for unit labour costs in the non-farm business sector from +0.1% in Q1 to -0.8%. Annual average hourly earnings growth (all employees) dipped from 3.23% to 3.11% in May: average weekly earnings have slowed markedly.
These wage growth measures would appear to justify the sharp rally in Treasuries. There are, nevertheless, a few caveats: the U6 rate tumbled to a fresh cyclical low in May. The prime-age participation rate has stopped rising too. The Federal Reserve Bank of San Francisco cyclical core PCE inflation measure jumped in April.
The Treasury market may be exposed to a sell-off on Wednesday’s CPI release. This would be negative for the stock market. Payrolls are expected to level off at record low levels of unemployment. The US is close, if not at, full employment. The slowdown compared to the first five months of last year is no surprise. In any case, the non-manufacturing ISM employment index bounced in May.

 

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