US non-farm payrolls and hourly earnings outpace forecasts in May

7th Jun 2024 11:42

(Sharecast News) - Hiring and wage growth in the US outpaced forecasts by a very wide margin in May.

According to the Department of Labor, the results of the Establishment Survey revealed a seasonally adjusted jump in non-farm payrolls of 272,000 for last month.

That compared to a consensus estimate of 185,000.

Revisions showed that payrolls expanded by 15,000 less than previously thought during the preceding two months combined.

Average hourly earnings were up by 0.3% month-on-month and 4.1% year-on-year (consensus: 3.9%).

Government hiring did recover to around its recent trend with 43,000 positions added during the month, following a slowdown to just 7,000 during the previous month.

But it was private sector hiring that drove the improvement, rising by 229,000 after a 158,000 gain in April.

Healthcare and Social Assistance paced payroll growth with an increase of 83,500.

Hiring in construction meanwhile rebounded from zero to 25,000.

The Household Survey on the other hand showed a one tenth of a percentage rise in the rate of unemployment versus the prior month to reach 4.1%.

Over time the results of the Establishment and Households converge.

For his part, Paul Ashworth, chief North America economist at Capital Economics, said that Friday's data would keep the Federal Reserve focused on the risks of higher inflation.

He also noted the growing gap between the employment figures contained in the Household survey and the payrolls numbers in the Establishment survey.

"The latest alternative QCEW employment data, used to benchmark payrolls, do suggest that payrolls need to be revised down significantly for the second half of this year, so possibly some of the recent out-performance will prove to be illusory too," Ashworth added.

"That said, we expect post-revisions to see slower employment growth, rather than an outright decline consistent with a recession beginning last fall."

Oxford Economics's chief US economist, Ryan Sweet, attributed the bulk of the beat in Friday's payrolls data versus their own forecast to government hiring.

"Overall, the labor market appears to be roughly in equilibrium, but the Fed needs to walk a tight rope," he said.

"If they wait for concrete evidence that the labor market is bending, then it's too late."

He also judged there to be "plenty of evidence" that nominal wage growth was headed down towards 3.5%, which would be consistent with the Federal Reserve's 2.0% inflation target.