US NFP: Despite April data, Fed rate hikes still on track - ING

James Knightley, Senior Economist at ING, points out that wage growth disappointed but he still sees sound fundamentals that will keep the Federal Reserve on track for more rate hikes.

Key Quotes: 

“Employment rose 164,000, but when you add in 30,000 upward revisions to the past two months then it is pretty much in line with the market expectation for a 193,000 rise.”

“Unemployment fell to 3.9%, the lowest level since December 2000, but the fall from 4.1% was amplified by a sizeable chunk of unemployed people leaving the labour force.”

“Rounding out the report was a softer wage number. There were some downward revisions and a weaker month-on-month reading for April of 0.1%, which mean the annual wage growth rate remained at 2.6%, rather than coming in at 2.7% as predicted.”

“It isn’t a particularly exciting report and certainly shouldn’t alter market expectations for monetary policy in any meaningful way, but it just feels a bit soft given the state of the economy.”

“A strong growth and firm inflation environment will keep the Fed in tightening mode and we continue to look for three further interest rates rises this year, starting with 13 June.”