Job Growth Remains Robust to Start Q2


Nonfarm payroll growth barreled ahead in April. Employment rose by 428K in the month, more or less in line with consensus expectations after accounting for modestly negative revisions to prior months. The labor force participation rate disappointingly fell two-tenths of a percentage point, but the decline came on the heels of a string of solid increases, and we are cautious about reading too much into today’s drop. Wage growth looks to be showing some tentative signs of peaking on a year-ago basis but is still running more than double its average pace in the 2010s. The employment side of the FOMC’s dual mandate is clearly not a barrier to monetary policy tightening at present. Chair Powell has repeatedly characterized the labor market as “extremely tight”, and both wage and payroll growth remain well-above their long-run sustainable growth rates. Calibrating monetary policy in a way that cools the labor market enough to bring down inflation but not so much that it tips the economy into recession will be a difficult task. However, in the near term the FOMC clearly has more policy tightening to do, and today’s solid job report reinforces our belief that the FOMC will execute another 50 bps rate hike at its next meeting on June 14-15. READ FULL ARTICLE>>