NFP: 3-month moving average suggests above-potential growth for the US economy - NBF

Analysts at the National Bank of Canada, point out that despite the March NFP outcome was below expectations the 3-month moving average at 202K, suggest above-potential growth for the US economy. They see the Federal Reserve on track for two more rate hikes during 2018.

Key Quotes:

“Non-farm payrolls grew 103K in March, disappointing consensus which was looking for a 185K increase. Revisions also showed a 50K downward adjustment to the two prior months. In March, the private sector added 102K jobs the lowest total in six months. Payrolls expanded in the services sector (+87K) and edged up in goods-producing industries (+15K). Meanwhile employment at the government level was roughly unchanged (1K). Average hourly earnings rose 0.3% in the month, thereby helping the annual rate to increase one tick to 2.7%.”

“The March outcome was below expectations but let’s keep things in perspective as it followed an unsustainable jump of 326K the month before. The more reliable 3-month moving average stands at 202K, a number that would suggest above-potential growth for the U.S. economy. This should allow wage inflation to converge towards 3% in the coming quarters for the first time in a decade. In our opinion, Fed policy normalization is still on track for two more rate hikes this year.”