US NFP: A solid reading; earnings trend still higher - Wells Fargo
|Analysts from Wells Fargo, explained that the solid rise of 227K in payrolls were supported by the private sector. Regarding the wage growth miss, they point out that the trend still points to the upside.
Key Quotes:
“Nonfarm payrolls rose a solid 227,000 in January, boosting the three month average to 183,000. Gains were strong across the private sector, with employment rising by 237,000 versus a pullback of 10,000 jobs in the government sector. Manufacturing employment posted another monthly gain (up 5,000) and is consistent with improved production and orders figures. Construction hiring was solid at 36,000 but was likely helped by mild winter weather.”
“These gains are consistent with solid consumer spending and continued economic growth. On a longer-term trend, since 2014, annual monthly job gains have slowed as wages have risen and the unemployment rate has approached full employment. Annual benchmark revisions released today showed that total payroll employment was about 60,000 lower as of last March, but monthly gains were revised up for subsequent months, bringing the 2016 average monthly gain up to 187,000 jobs.”
“Average hourly earnings rose a smaller-than-expected 0.1 percent in January and that brings the year-over-year rate to 2.5 percent. However, we suspect some of the weakness reflected in the composition of hiring over the month; job growth was strong in lower paying industries like retail (up 46,000) and leisure & hospitality (up 34,000).”
“While still within the Fed’s estimates of full employment, the uptick in unemployment supports Chair Yellen’s case that the labor market still has some “room to run” and our call that the Fed will still move cautiously this year. We expect only two rate hikes at present, with the first coming in June.”
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