U.S. economy likely returning to more solid growth from Q2 onwards

Nonfarm payrolls were stronger than expected in May. Up by 280k, they were significantly stronger than consensus (226k) expectations. There were net revisions of 32k to the previous months of payrolls, suggesting an even healthier picture of labor markets than initially estimated. 

The latest data bring the three-month average gain in payrolls up slightly, to 207k, a bit higher than the Q1 average of 195k but below the strong Q4 14 performance of 324k. Payroll growth has slowed since its peak in the last quarter of 2014, consistent with our view that the boost from lower energy prices on activity and labor markets would gradually fade by the end of Q1 15. 

"We look for monthly payroll growth to average 200-225k over the remainder of the year and to continue driving the unemployment rate (UR) lower. We view this report as supporting our view that the Q1 softness was likely temporary and driven by one-off factors. We see the economy returning to more solid growth from Q2 onwards and for the recovery to be sustained. As a result, we continue to look for the first rate hike in September." said Barclays