The US is set to release the change in the number of people employed during the month of April, in what should be seen as yet another critical piece of information about the US economy. What’s interesting about today’s set of numbers is that after the volatile range observed from Jan to March, primarily due to the US government shutdown, the data should start to normalize again, so whatever number comes out today, should give us a more accurate picture of the state of affairs in the US labor market.
It’s worth noting that the US jobs market has unquestionably reached levels considered to be at full capacity, with little to no slack to account for. It’s not that workers are not in demand by employers, but the real issue, whenever an economy reaches full capacity utilization of its labor force, is to find the qualified employees due to constrained supply, which paradoxically, tends to pose an increase in downside risk in the headline number, today expected at 175-180k.
What this means is, rather than taking at face value the breakdown of the US jobs number and the unemployment rate, the debate has been gradually shifting towards whether or not employers are forced to increase the average hourly wages paid in order to attract the shortage of qualified labor force. Therefore, the reaction in the USD comes as a function of not simply fixated on the breakdown of the change in the labor force, but it must come accompanied with an encouraging pick up in earnings too.
Let’s now deconstruct the event, category by category, before coming up with some conclusions that could help prepare for the volatile event.
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