US labour market –almost no “blemishes” in April

The verve of the US labour market showed no signs of flagging in April, either. The labour market report recently released shows a strong rise in the number of employed persons of 263,000 on the prior month. The unemployment rate had already been at an historical low, and as a result fell even further, from 3.8% to 3.6%. The service sector once again provided the key boost, whereby construction industry and the public sector both recorded increases in employment levels.

Despite the seasonal adjustment of the figures, the USA usually reports a sound upturn in employment in the spring. In the past, this has tended to be driven by the retail trade. In the last month, however, no less than 76,000 new jobs were created amongst corporate service providers, which does not actually come as a great surprise in the light of the good sentiment figures in this sector. In the final instance, we are probably also witnessing the positive impact of the reduction in corporation tax last year.

There are hardly any blemishes to be found in the April report. Not only the short-term unemployed are benefiting from the powerful momentum of the job creation engine but above all also the number of those who have first started to seek work in the last few weeks fell significantly. Countless long-term unemployed persons likewise managed to re-enter the labour market at the beginning of the quarter. It may be that these persons are also more prepared to make concessions as regards remuneration, because otherwise the restrained increase in wage levels again reported is somewhat remarkable. After all, precisely amongst well-qualified staff the unemployment rate is already closer to 2% than 3%. Wage levels nevertheless only rose modestly in April, and as in March they only edged up 0.2% on the prior month.

This bears out the Fed’s assessment that there are at present no overly great inflationary dangers. However, the Fed’s governors will keep a very watchful eye on wage trends with the job engine still performing so well, as the danger of a sudden sharp climb in wages rises as the labour supply drops. Because then the pressure on consumer prices would increase accordingly. Overall, the latest US data on the labour market and on macroeconomic growth contradict the concern voiced repeatedly in recent weeks that the USA faces a possible recession.



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