After another very strong payrolls report on Friday, markets are finally pricing in less than three rate cuts this year: eventually, all rate cuts may get priced out. Aggregate weekly private payrolls jumped by an annualised 6.24% in Q1. The y/y for this proxy of nominal GDP has stopped decelerating, firming to 5.92% in March. Treasury yields closed at YTD highs across maturities on Friday, but with underlying nominal GDP growth running in the region of 5.5-6.0%, longer-dated Treasury yields have not peaked yet.
Within construction, nonresidential specialty trade contractors increased 16k, a fresh high: many of these jobs have been associated with the IRA & CHIPS Acts, higher infrastructure spending, and the buildout of data centres. TSMC will receive $6.6bn in grants, and up to $5bn in loans, from the Biden administration, increasing its pledged investment in the US from $40bn to $65bn. Intel will also receive $8.5bn in direct funding and up to $11bn in loans from the Biden administration, pledging $100bn of investment over five years to expand U.S. chipmaking capacity and capabilities critical to economic and national security.
Composition-adjusted average hourly earnings rose 0.40% m/m in March and by an annualised 4.91% in Q1. The fundamentals to support consumer spending remain solid. The household debt service ratio edged up to 9.80% in Q4, but this remains below pre-pandemic levels. The jump in part-time employment in March needs caveating too. Part-time employment for economic reasons dipped, in fact, by 68k; the increase in part time employment was instead due to non-economic reasons (+593k). This could be due to ill-health, childcare problems, or simply choosing to work less, which would tally with the jump in excess retirements since the pandemic. In any case, it implies a tighter labour market at the margin.
