Jobs growth in the US keeps surprising Wall Street analysts and during February, just a slight disappointment on wage growth marred another great set of labour market data, published on Friday.
February payrolls rose by a eye-popping 313,000, well above the consensus forecast of 205,000 and higher than the previous month’s 239,000 – revised higher from an initial 200,000.
It was the 2.9% rate of annual growth in average hourly earnings in the January report that triggered the inflationary concerns which set bond and equity markets aflutter in early February.
When the January report was published on 2 February, investors were spooked that the inflationary impact of such a strong labour market and robust wage growth would prompt the Federal Reserve to a faster pace of rate hikes.
By the close of trade on Friday 2 February, the S&P 500 had fallen 2.13% – one of the weightiest daily falls seen in the US since the financial crisis – only to be surpassed after the weekend to drop 4.1% on the Monday.
Inflation outlook tamed
The latest data, however, was a little more settling. Yes, the headline payrolls number was big. It was also the fifth-straight month where the unemployment rate remained at 4.1%.
Not an anomaly, but rather suggesting that more people have been joining the labour force in the last few months.
But the fall in annual rate of growth in average hourly earnings to 2.6% helped tame the inflation outlook.
James Ingram, investment manager at MB Capital, expressed some parallel concerns, however following President Trump’s introduction on Thursday of tariffs on steel and aluminum imported into the US.
“February’s fall in average wage rise data takes some of the pressure off, but the creation of more than 300,000 jobs in February suggests it will return in the months to come.
“Throw in a potential trade war between the US and the EU and the US economy could be headed for a perfect inflationary storm later this year.”