FOMC: No more suspense about the June meeting – BNP Paribas

Research Team at BNP Paribas, notes that the US May labour market report came as a cold shower as the non-farm payrolls grew by a very limited 38k, the smallest gain in six years.

Key Quotes

“Even if part of the slowdown (from 123k in April, downward revised from a preliminary 160k) was due to strikes in the telecommunication, the slowdown is beyond that: the net effect from strikes was probably around -35k. On top of that, after a promising rise, the labour participation ratio fell back quite markedly (from 63.0% in March to 62.6%). Hence, the unemployment rate coming down to 4.7% is not necessarily good news, as being due to workers leaving the labour force. Additional worrying news comes from an increase in the share of involuntary part-timers.

In short, the level of underemployment, after almost constant improvement over the last years, deteriorated in May, helping understanding the sluggishness of wages, which decelerated to 2.4%. Even if one point does not make a trend, the Fed will quite certainly not raise rates on June 15th.”