Labor market indicator say’s no hurry for FED

Last Friday NFP report showed 223,000 people were added to payroll making March's drop in employment gains a temporary phenomenon.

However all labor market indicators are not as encouraging as NFP report.

• Last night US Federal reserve published labor market condition index for month of April, which dropped -1.9 after dropping to -0.3 in March. While March was not a surprise given lower job gains while April's is.

• Kansas city FED's labor market condition index is yet to move into positive territory as shown in chart, so it can hardly be said that US labor market has reached peak which can be considered as normal level of employment.

Probable FED action -

• US FED might move ahead with rate hike in June or September given rise in bond yields across world and rise in inflation expectation however subsequent rate hike pace would be slower.

Isn't FED worried about inflation?

• FED is more worries about growth and disinflation for now, than falling behind the curve. In communication since winding up bond purchase FED has indicated that would let inflation run beyond its target and fall behind the curve in order to assure recovery gathers pace both in economic activity and labor market.

Why FED is less worried about inflation?

• With interest rate at near zero level and $ 4 trillion balance sheet FED has ample ammunition to fight inflation but lacks enough tools to fight disinflation.

As a net result rise in longer term yields over inflationary expectation would do little to provide support to US dollar. Dollar index is trading at 94.3, down -0.77% for the day.