US NFP reflected manufacturing weakness, consumer strength - Wells Fargo

Analysts from Wells Fargo, explain that beyond the 215K gain in the NFP, labor costs continue to rise, consistent with a tightening labor market and noted that structural unemployment persists. 

Key Quotes: 

“Overall job growth in March was a solid 215,000. Our theme for the annual outlook was the Great Divide and we certainly see this in the pace of job growth during the past three months. We have emphasized the divergence between the production and services sides of the economy over the past six months, and we can see that divergence in today’s numbers.”

“Over the past three months, job growth in manufacturing and government has been weak while strong in construction (consistent with rising housing starts and modifications). Private services has also seen broad-based gains, with strength evident in education & health, professional & business services and leisure & hospitality.“

“In today’s employment report, manufacturing jobs declined 29,000 while mining fell 12,000. Overall, private service-providing jobs rose a solid 199,000. These results are consistent with continued moderate economic growth and no recession in the outlook for 2016.”

“Another sign of the labor market expansion maturing is the rising cost of labor as the unemployment rate continues to improve during the economic cycle. Average hourly earnings rebounded 0.3 percent in March and are up 2.3 percent over the past year. That said, the pace of wage gains has been modest compared to the last three economic expansions. The structure of the labor market has clearly changed.”