US: Strong jobs but weak wages - Nomura

In view of analysts at Nomura, US payroll gains were above expectations and unemployment remains low, but wages remains on a weaker side.

Key Quotes

“Nonfarm payrolls increased by 222k in June, above expectations (Nomura: 165k, Consensus: 178k). Labor markets continue to add jobs in excess of the rate needed to absorb labor supply growth, indicating further labor market tightening. However, wage growth remained tepid even as the unemployment rate hovers near historical lows. Some of the upside surprise in headline payroll employment increases was driven by an unusually large 35k increase in government jobs.

• Smoothing monthly volatility, payroll growth averaged 194k in Q2. Given the slowing working-age population growth, we expect job growth to decelerate going forward, with growth in Q3 averaging 185k.
• The unemployment rate inched up to 4.4%, but just barely: on an unrounded basis, it sits at 4.357% in June. Note that it is still very low compared to historical standards.
• The labor force participation rate edged up by 0.1pp to 62.8%, remaining within the steady range seen over the past three years despite an aging population.
• Average hourly earnings growth remains largely flat, increasing 0.2% m-o-m in June (2.5% y-o-y), with the growth in the prior month lowered by 0.1pp to 0.1%. In Q2, aggregate hours worked increased at an annual pace of 3.0% q-o-q, faster than 1.4% in Q1, suggesting that productivity growth remains lackluster so far in 2017.”