The US labour market: A closer look at the data

The US will release its official labour market report tomorrow, and traders are busy analysing data from related indicators, which consistently point to a market improvement rather than a looming recession.

The fast-growing indicator for new vacancies rose again in recent years, reaching over 10 million in April, defying the expected drop from 9.7 million to 9.4 million. For comparison, it was around 7.5 million at the end of 2018, with a similar unemployment rate, and peaked at 12 million last March.

Weekly jobless claims numbers have increased but are still better than expected. We also note that the upward trend formed last October was broken in May. The movement of this indicator resembles the small fluctuations we also saw in 2018 and 2019.

The third indicator closely resembles the NFP is the change in private sector employment from ADP. It reported an employment increase of 278k from 291k a month earlier, about 100k above the average analysts’ expectations. Since the beginning of the week, the markets had been expecting employment growth of around 190k, according to the analyst estimate.

But the latest data will almost certainly raise these expectations significantly to last month’s levels of around 253k. Particular attention should be paid to the dynamics of hourly earnings. A sharp rise from the current 4.4% y/y would leave the Fed with no choice but to hike the rate further.