Tomorrow we get the latest read on the state of U.S. employment. While jobs day is always widely followed, its importance has increased significantly in the last year or so, as the Federal Reserve has made very clear that any shift away from loose monetary policy will be based on two main factors: employment and inflation. Two weeks ago at the Federal Open Markets Committee (FOMC) meeting, Fed Chairman Janet Yellen said that while the labor market is “approaching full strength,” it’s not there yet. The Fed indicated a rate hike would not likely occur in June, but that it would be “appropriate” this year if the economy improves.
The Estimize community is looking for nonfarm payrolls (NFP) to come in at 232k for the month of May, a 4.3% increase from April. This would be the second highest NFP number this year, after February’s 266k, but still significantly lower than the figures clocked at the end of 2014.
US NONFARM PAYROLLS
Unemployment is expected to stay unchanged at 5.4%, the lowest rate since April 2008. This has been a controversial figure as of late. Although it has continually fallen over the last year, it does not include a read on those that are underemployed or have just given up on looking for work altogether, and therefore can be misleading.
US UNEMPLOYMENT RATE
While most other figures in the US jobs report have been improving over the last couple of years, wage growth is still stagnant. Estimize is expecting average weekly earnings to come in at 859.33k for May, a measly 0.15% increase month over month, and not where it should be at this point in the recovery. With the labor market tightening, employers will have to increase employee wages at some point to stay competitive. Yellen mentioned recently that she is encouraged by wage increases implemented by large retailers such as Wal-Mart, Target and McDonald’s and believes others will follow and that broader wage growth is on the horizon.
US AVERAGE WEEKLY EARNINGS