NFP: No cooling in the trend – Wells Fargo

According to analysts from Wells Fargo, today’s US employment report showed that wages and income improved, clearing the way for a rate hike from the Federal Reserve at the June meeting. They added that despite the new cycle low in unemployment, labor participation is still concerning

Key Quotes:

“Nonfarm payrolls rose by 223,000 in May, above consensus expectations. Over the past six months, job gains have averaged 202,000 per month and continue to indicate no cooling in the trend. Payroll growth looks increasingly broad across industries.”

“Solid hiring in recent months helped to push the unemployment rate down to 3.8 percent in May. That matches the low of the 1991-2001 expansion. Other indicators of labor market slack also point to an increasingly tight labor market. U-6 unemployment, which includes workers marginally attached to the labor force and part-time workers who want full-time hours, fell to 7.6 percent last month, marking the lowest level since 2001.”

“With unemployment rates signaling labor has become increasingly scarce, a rebound in labor force participation””particularly prime-age participation”” has become all the more important. Although prime participation has recouped significant ground over the past two years, it ticked down for a third straight month in May, and a full recovery from the Great Recession for this group remains some ways off, as structural hurdles like mobility persist.

“Stronger earnings and the continued solid pace of job gains keep the FOMC in the clear for a rate hike later this month despite renewed concerns about the European debt crisis and global trade relations.”