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US non-farm payolls rise by 313,000 in February, wages dip

By Alexander Bueso

Date: Friday 09 Mar 2018

US non-farm payolls rise by 313,000 in February, wages dip

(ShareCast News) - Job growth in the States picked-up to its strongest pace since mid-2016 last month, helped by sharp increases in construction and government hiring, but wage growth fell short of economists' forecasts.
US non-farm payrolls picked-up to a 313,000 pace in February, according to the results of the Bureau of Labor Statistics's Establishment survey, easily outstripping forecasts from economists for a gain of 195,000.

However, the rate of growth in average hourly earnings fell back from a downwardly-revised reading of 2.8% year-on-year for January to 2.6% (consensus: 2.9%).

Even so, for Paul Ashworth at Capital Economics, "The only negative is that with that 0.1% m/m gain in average hourly earnings [...] Nevertheless, with the Fed's latest Beige Book noting that labour shortages are now severe in many industries, that isn't going to prevent a more aggressive monetary tightening this year. This is more evidence that the Fed will need to hike four times this year, starting later this month."

According to Ashworth, part of the reason for the higher than forecast payrolls number and lower than projected earnings figures in February was that illness and adverse weather had impacted on the data for January.

"This is more evidence that the Fed will need to hike four times this year, starting later this month," he added.

Hiring in construction increased by 67,000 last month, the most since March 2007, while public sector employment jumped from just 1,000 in January to 26,000 for February, the .

In parallel, the labour force participation rate, a key gauge of tightness in the labour market, increased by three tenths of a percentage point to 63.0% - a five-month high.

That pushed the unemployment rate, which is derived from the separate Household survey, higher by a tenth of a percentage point over the month to 4.1% (consensus: 4.0%).

Non-farm payroll growth for the previous two months was revised higher by a combined 54,000.

By way of an initial reaction, as of 1354 GMT, the yield on the benchmark 10-year US Treasury note was four basis points higher at 2.90%.

For his part, Ian Sheperdson at Pantheon Macroeconomics pointed out the potential impact on construction sector hiring from fabourable weather during the month and the 0.6% jump in Establishment survey's index of aggregate weekly hours, the biggest such rise since March 2014.

"For the Fed, the fifth straight 4.1% unemployment rate suggests - perhaps - that the trend in participation is rising," he added.

"[...] For now, though, the lack of a 3-handle on the unemployment rate makes it easier for the Fed to stick to the narrative of gradual normalization. With markets expecting almost three hikes this year, and earnings likely in our view to beat consensus, that's no threat to valuations even if the Fed hikes four times, as we expect."

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