Our guide to May’s US jobs data

An unusually warm February was only partly to blame for last month’s surprise 98k figure. There was broad-based weakness, notably in services, which we would expect to at least partially correct this month. But in any case, the Fed seems happy with slower jobs growth as the economy nears full employment.

At complete odds with payrolls, the household survey shows that almost one million jobs have been added in the past two months. This survey does tend to swing around, and we suspect we’ll see some correction. The unemployment rate could tick up, but anything sub-5% is considered close to full employment.

There’s little doubt that tight jobs market conditions are driving up pay. But for the Fed to take the pace of rate hikes up a notch, we need to see wage growth go above 3%, and that’s not likely until much later this year. This, and sub-2% core PCE, are two key reasons why we think a June rate hike is still a 50:50 call.