Downside Risk for US Labour Market Report – Danske Bank
Research Team at Danske Bank, suggests that today focus is on the US labour market report for April.
“The labour market is one of the bright spots of the US economy and in the April statement the Fed recognised that the labour market continued to strengthen in Q1, despite weak GDP growth.
We look for non-farm payrolls in line with the recent trend but there is some downside risk after April's ADP employment was the weakest since 2013. The ADP figure is not always the best indicator for non-farm payrolls and job growth can fluctuate much from month to month, nevertheless a confirmation of the weakness is something that would worry the Fed in our view.
If employment continues to rise at a solid pace, we believe the Fed has its eyes on things other than employment growth. Due to the Fed's increasing focus on inflation, we keep an eye on average hourly earnings, which we estimate rose 0.25% m/m in April, implying an unchanged wage inflation rate at 2.3% y/y.”