US May jobs report - Analysts react

"A few minutes ago, I was sent a chart showing that May payrolls tend substantially to undershoot consensus substantially when the survey is conducted early in the month. This year, the first day of the survey week was the 7th, the second earliest possible. We can't know for sure if this explains the soft reading today, but it certainly would help explain the huge discrepancy between the published number and the strength of most survey data. For now, we are very inclined to expect a big rebound in June. [...] The drop in unemployment, meanwhile, is remarkable [...] it now stands at a new cycle low, just half a point below its post-1970 low, 3.8%, reached for just one month in April 2000." - Ian Shepherdson, Pantheon Macroeconomics

"Slower employment growth always begs the question of recession risks. In our view, employment growth is one of the stronger recessionary indicators, and slower employment growth is something we always take seriously. In past cycles, slower employment growth (relative to the recovery-level average) has preceded recessions by 9-12 months, and we would take it as a negative signal should employment growth continue to soften. However, slower employment growth at present could be related to the abating of post-election euphoria that could have led to a faster pace of hiring earlier this year." - Barclays Research

"With the unemployment rate 0.2pp and 0.4pp below the Fed’s year-end and long run estimates signaling labor market tightness and a significant bounce back in economic growth in Q2 following the temporary weakness in Q1, we expect the Fed will raise rates at its June meeting. However, the Fed will probably think twice about another rate hike at its September meeting if wage inflation remains low and the recent slowing in core consumer price inflation proves to be more than transitory. The very low unemployment rate and constant complaints from employers about the dearth of qualified skilled workers both point to an acceleration in wage inflation in the near term. But the lack of pick up in US productivity may continue to constrain wage growth." - Michael Levy, Roiana Reid, Berenberg Capital Markets

"Fiscal policy remains the wild card for the Fed and USD. Markets have written the Trump trade off, but the President’s climate agreement speech yesterday made direct reference to tax reforms, and Treasury staff remain very vocal about accelerating GDP growth. With unemployment at 4.3%, if we do see stimulatory fiscal policy and a GDP acceleration there is potential for wage driven inflation to come roaring back." - Ranko Berich, Head of Market Analysis at Monex Europe

"Our own research, which we are close to publishing, suggests that the so-called natural rate of unemployment might be lower than before because frictional unemployment has fallen and because the aging of the population has had a downward impact. The Fed may separately come to the same conclusion given the combination of low unemployment and wage growth. Nevertheless, if the survey evidence proves correct and the unemployment rate dips below 4%, it doesn’t matter if core inflation remains below target, the Fed will keep hiking." - Paul Ashworth, Capital Economics

"There is certainly little evidence in this report that the labor market is overheating or is likely to do so any time in the foreseeable future." - Dean Baker, CEPR