Recovery in US job growth
Last month, US job growth recovered and the unemployment rate fell to a near seven-year low of 5.4%. This put forward underlying strength in the economy in the beginning of the second quarter, which could lead to sharp rise in a Federal Reserve rate later this year.
The Labour Department had said on Friday that non-farm payrolls rose 223,000 since gains in services sector and construction jobs counterbalanced weakness in mining. Wage growth was moderate and March payrolls were found to be declining. It made financial markets to decline rate hike bets.
According to Michael Gapen, chief US economist at Barclays in New York, "We see this report as reducing concerns that weak first-quarter growth represents a loss of economic momentum''. However, he said that the recovery was not that strong; it wasn't adequate to consider that the Fed could hit rates higher prior to September.
It was observed by revising March payrolls that only 85,000 jobs were created, which is the smallest number since June 2012. As a result of that 39,000 fewer jobs were added in February and March than what was reported earlier. It highlighted weakness in activity in the beginning of the year.
The report was applauded by investors on Wall Street. The session was ended with US stocks over 1%higher. There was decline in yields on US Treasury debt; future contracts showed traders sticking to bets that the US central bank would increase rates from near zero this year.
Michelle Girard, chief economist at RBS in Stamford, Connecticut, said that even when there is no increase in wages or inflation, it is not expected that the Fed would not make efforts for change as the unemployment rate comes close to 5%.