US labour market has a strong start to 2024

US employment growth was strong, unemployment held steady and wages growth accelerated in January
Kieran Davies

Coolabah Capital

The US payrolls report was strong in January, coming in better than market expectations. 

Payroll employment rose by 0.35mn in the month (or another 0.2%), such that trend annualised monthly growth has accelerated from about 1½% to 2¼%. 

The unemployment rate is still at a historically low level, up from the multi-decade low of 3.4% early last year, but unchanged at 3.7% in January, down from 3.8% late last year. 

In terms of wages growth, private-sector average hourly earnings rose by a strong 0.6% in January, which was the largest monthly increase in almost two years. 

On a three-month annualised basis, wages growth accelerated to almost 5% in trend terms, contrasting with the trend slowdown to about 4½% in Q4 in the Fed’s preferred measure of the private-sector employment cost index ex-commissions etc. 

However, this strength is likely exaggerated by a weather-influenced drop in average weekly hours, with an ex-Fed researcher pointing out that bad weather stopped more people from working than usual in the month (about 0.2mn on CCI's seasonal adjustment).

Note that Fed Chair Powell’s US 60 minutes interview – where the promo has the interviewer asking Powell why not cut interest rates now and Powell pausing before answering – at 7pm NY/11am Sydney will likely not be geo-blocked by CBS.   

US employment growth has accelerated recently
US employment growth has accelerated recently
US unemployment is still relatively low
US unemployment is still relatively low
Average hourly earnings picked up strongly in January ...
Average hourly earnings picked up strongly in January ...
... contrasting with slower growth in the employment cost index
... contrasting with slower growth in the employment cost index
Hours worked were likely depressed by bad weather, thereby boosting average hourly earnings
Hours worked were likely depressed by bad weather, thereby boosting average hourly earnings
........
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Kieran Davies
Chief Macro Strategist
Coolabah Capital

Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...

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