Non-Farm Payrolls Beat Expectations, Wages Remain Subdued

Non-farm payrolls increased by 313,000 jobs in February according to a report issued by the Labor Department on Friday.  Expectations were for an increase of 210,000 on the headline number.  The unemployment rate was in line with expectations at 4.1%. The workweek edged higher by 0.1% which was also expected.  Wage gains increased by 0.1%, which was less than expected, compared to the 0.2% expected and the 0.3% whisper number.  The year over year figure for average hourly earnings was 2.6%, compared to the 2.9% expected. U.S. equity futures shot higher following the report. The EUR/USD was nearly unchanged and yields were slightly higher. The robust growth in the headline number was offset by softer than expected wage gains. So, wage inflation is muted despite robust growth.

The Labor Force Increased

The labor force participation rate rose to 63.0% from 62.7%. Private payrolls were up 287k, compared to the ADP which were up 235k. The goods-producing sector added 100k jobs, while construction added 61k. Manufacturing payrolls increased 31k. The service sector added 187k with trade/transport up 72k and business services up 50k. Government employment was up to 26k, with the Federal shedding 7k. This is a great report, quite goldilocks, with employment climbing and little wage inflation pressure showing through.

Fed President Evans Sees a Strong Labor Force

Fed President Evans was on CBNC following the Labor Department Jobs report. Evans said the report was strong but it’s not leading to wage pressures. Evans said that more people coming into the workforce, which should increase the natural rate of monthly job creation, which could be up to 150K. Evans said there is a new market environment where inflation is at their objective but not rising above which means the Fed can take its time to rate interest rates. He said that the Fed cannot be behind the curve unless inflation is overshooting already. Evans is a dove, and when asked about his dot plots, the trajectory of interest rate hikes, he said he wants to wait until the Amazon effect, which has caused a decline in prices, is out of the year over year numbers.