In our view, the mix of strong jobs growth, modest wage inflation and rising labour force participation is perfect for risk markets. Rising labour force participation and continued modest wage inflation are easing the imminent pressure on the Fed to hike interest rates, while strong job growth supports household spending.
We continue to look for the next Fed funds rate hike in September but the latest run of positive US data and improved financial market sentiment increase the chance of a June rate hike.
The US employment report showed an increase in payrolls in February of 242,000 and a net revision to January and December of +30,000. This leaves the average monthly rate of jobs growth over the past three months at an impressive 228,000.
The details show that the manufacturing sector shed 16,000 jobs, a payback from strong job growth over the past three months. Jobs growth in the construction sector also cooled in February, while service sector employment jumped to 245,000 with broad-based strength and, in particular, a rebound in education and health employment to 86,000, from 24,000 in January.
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