Nonfarm payrolls recap: continued improvement in labor market - Nomura

Analysts at Nomura noted that the data that came out last week suggested that the economy continues to grow, with continued improvement in labor markets. 

Key Quotes:

"The April jobs report showed strong job gains (+211k total nonfarm, +194k private) and diminishing slack. Month-to-month changes in payrolls and other labor market variables have been blurred by the effects of the second-warmest winter on record. 

Smoothing through the first four months of the year, we see that the 2017 job market continues to improve notably with strong job gains and diminishing slack. Job growth averaged 185k per month, and the household survey shows even stronger growth. The unemployment rate continues to fall, now at 4.4% in April from 4.5% in March and 4.8% in January. At 4.4%, the unemployment rate is currently the lowest it’s been since May 2007. 

Even more surprising is continued decline in underemployment rate (U6), which started 2017 at 9.4% and registered 8.6%in April, the lowest reading since November 2007. The labor force participation rate continues to defy the gravitational effects of the ageing population, and has remained nearly constant, hovering between 62.9% and 63.0% this year. 

Despite the diminishing slack, average hourly earnings, though increasing 2.5% yo-y, are showing no signs of acceleration. The tension between the robust labor market data and spending data continues to persist. Light vehicle sales were 16.81m saar in April, lower than expectations, and only bit higher than the disappointing March figures. Reports have emerged that some plants may close down for part of the summer because of relatively weak demand, highlighting ongoing industry challenges."