US NFP: Job growth moderates - Wells Fargo

Analysts from Wells Fargo, explained that the increase in NFP of 138K is more consistent with fundamentals. Despite the disappointing headline they still see jobs and wage numbers supporting the case for continued economic growth and stronger income. 

Key Quotes: 

“Nonfarm payrolls rose a modest 138,000, with the three month average at 121,000 jobs. This morning’s print is consistent with the demographics of the labor force and the anecdotal comments of a skills shortage. Hiring in the services sector remained above its three month moving average, as gains in business services, education & health and leisure & hospitality were solid. Retail continues to exhibit weakness due to ongoing structural challenges. Financial services continue to exhibit modest gains.”

“Average hourly earnings rose 0.2 percent in May, keeping the year-ago pace of wage growth at 2.5 percent. Despite continued steady job growth in 2017, earnings have yet to break out of this mid-two percent pace. The softer inflation readings over the past couple months have likely weighed on nominal wage growth. On balance, average hourly and weekly earnings continue to improve and, along with more jobs, support the case for household income gains.”

“The headline unemployment rates were 4.3 percent (U-3) and 8.4 percent (U-6) in May, once again new cycle lows. Yet, underneath the headline, the labor market continues to face a cross-current of challenges. First, the labor force participation rate has stabilized in recent months, but is below the rates seen for both men and women over the prior two decades. Second, despite steady improvement, those employed parttime for economic reasons remains higher than has been the case in previous expansions.”