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James Knightley, chief international economist at ING, notes that the US NFP printed 263,000 jobs in April, well ahead of the 190,000 consensus forecast which is an incredibly strong outcome and suggests US corporates aren’t experiencing the downturn priced by the bond market.

Key Quotes

“We had expected a weaker outcome, but this was more due to the lack of available workers with the right skill sets than any dip in demand for labour. The National Federation for Independent Business reported yesterday that 38% of its members couldn’t fill their vacancies due to a lack of workers, but clearly today’s data shows that firms can hire.”

“The unemployment rate fell to 3.585% from 3.811%, which takes us to a new 50-year low and highlights how tough it must be for companies to hire workers with the skills their business need. The participation rate fell yet again and now stands at just 62.8% after 490,000 workers left the civilian labour force.”

“Pay rose 0.2%MoM/3.2%YoY versus a consensus forecast of a 0.3%MoM gain. However, March’s figure was revised up by a tenth of a percentage point to 0.2%MoM so on balance it is broadly in line. Given the competition for workers, we expect pay to continue grinding higher.”

“Assuming a US-China trade deal can be agreed and investment spending stays firm we continue to look for the US economy to expand at around 2.5% this year, suggesting little need for interest rate cuts from the Federal Reserve.”

“The combination of decent growth, better financial conditions and a consistent grind higher in inflation means we are firmly in the camp that expects monetary policy to be left unchanged throughout 2019.”