US non-farm payrolls gains likely weakened in February

In recent months, certain US labor market indicators have slowed down. The manufacturing survey evidence has weakened and the services surveys have declined too, although moderately. There is an additional concern regarding the slowdown in temporary employment in January. However, its relationship with permanent employment has not been proper in recent times.

US non-farm payrolls for February are expected to have recorded a subdued growth of 180,000. The jobless rate is likely the same at 4.9%, with average hourly earnings growing at 2.6%. The modest 151,000 gain in non-farm payroll employment in January is likely to have been the beginning of a serious slowdown. In January manufacturing payrolls grew barely by 29,000.

Meanwhile, weekly jobless claims have declined further below 300,000, whereas the job openings rate recovered in December. Employment gains are expected to average slightly below 200,000 per month in 2016. However, it will not be much of a concern when the jobless rate is below 5%.

Lastly, the average hourly earnings growth of 0.5% m/m in January has certainly overstated the wage growth strength and was partly a snap back after wages were unchanged in December. However, on a wider picture, the wage growth is trending higher slowly. Moreover, the growth is reflected in a stable acceleration in core inflation too.

"We have pencilled in a 0.2% m/m increase in average hourly earnings in February and expect the annual rate to climb above 3% before yearend", says Capital Economics.