US Job Creation Strong Again But Wage Growth Remains a Concern

Another very strong jobs report from the US in February as 295,000 jobs are added and the unemployment falls to 5.5%. With expectations at 240,000 and 5.6%, respectively, this was far better than expectations. Average hourly earnings were slightly weaker than expected at 0.1% from a month earlier and 2% on the year, while participation fell back to 62.8% from 62.9% a month earlier which may have contributed to the lower unemployment figure.

All things considered I think this is a very good labour market report and will only feed into expectations for a rate hike from the Federal Reserve in June. The rally in the dollar immediately after the release clearly supports this view as it drove the EURUSD pair down to 1.0880 and there could be more to come with September 2003 lows around 1.08 offering further support below here.

I do believe that hourly earnings may be a minor issue given that the Fed is determined to see this improve in order to drive inflationary pressures this year but with the unemployment rate now at the upper end of the range that is deemed full employment, it’s surely only a matter of time until we start to see some significant wage growth.

I think the June meeting may just come a little soon and with wage growth not quite taking off yet, I still believe that the Fed will wait until September to act. They are clearly in no rush to make this decision and with inflation below target, they don’t need to.

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