US May NFP: Not a Signal of Underlying Weakening - Lloyds Bank
According to analysts from Lloyds Bank the market possibly overreacted to the US employment report. They expect labor market weakness to be temporary but point out that today’s numbers will give FOMC staff a pause to think.
“This was the smallest monthly payrolls rise since 2010Q3. We think it is probably an aberration rather than a signal of underlying weakening, as we have not seen the rise in weekly jobless claims that would normally be associated with a deterioration in labour market conditions.”
“It should be noted that a similarly unexpected shortfall in March of last year was followed by a 250k rebound in April. Nevertheless today’s data will at the very least give Fed policymakers pause for thought.”
“Fed Chair Yellen’s scheduled speech on Monday gives her a last opportunity to influence market expectations before the June FOMC policy meeting. While she will probably council against reading too much into one number, an interest rate hike at the June meeting now looks very unlikely.”
“Indeed, markets’ immediate reaction has been to price out any interest rate hikes for the rest of this year. That is probably an overreaction. Data over the past couple of weeks has suggested that economic growth is picking up in Q2 and seen in this light we would expect any labour market weakness to be temporary.”