Labour market remains in very solid condition

The US labour market remains robust and will certainly keep the Federal Reserve on track to hike its policy rate by 25 basis points during next week’s FOMC meeting.

Looking at the labour market, the latest addition in new jobs created last month was impressive, with the strongest increase registered since mid-2016.

More in the detail, the Establishment Survey shows that payroll gains were broad-based, with jobs in construction (+61k) showing the strongest rise since the expansion, and the retail sector (+50k) also registering solid gains. We are not overly surprised by the slowing in wage growth, and believe that with a continuing labour market tightening, wage pressures are going to be on an upward trend.

This is also confirmed by the latest productivity data, which show that unit labour costs – an important compensation measure – are rising solidly. The unemployment rate – at 4.1% – remains low, and the increase in the workweek (to 34.5 hours worked last month) suggests a solid momentum for aggregate hours worked.

Gero Jung – Chief Economist – Mirabaud AM