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NFP Report


June 5 2015, 08.30am GMT


The U.S jobs report is expected to be released later today where it will provide statistics on the general job growth rate in May as well as the unemployment rate in the U.S.

Economists expect a 200,000-plus gain to be announced as well as an increase in wages.

Added to this, the jobs report is also expected to shed more light on other speculations including the pace of hiring, the real unemployment rate as well as which sectors are booming when it comes to employment.

So far in 2015, the economy has averagely added 194,000 jobs monthly. Should the trend continue, this rate is capable of reducing unemployment over time. However, the rate is still slower than the number posted in the second half of 2014 where the economy pumped out an average of 281,000 new jobs per month.

The co-head of global economic research at the Bank of America Merrill Lynch, Ethan Harris, expressed his pessimism on the job rate getting stuck on an average of 200,000 jobs. However, although most economists like Harris are pessimistic, they don’t expect hiring to start decelerating until 2016 at the earliest. Added to this, these analysts believe that the numbers have remained lower and consistent as a result of an increase in hiring by small businesses as well as a high level of job openings.

Ahead of the jobs report, new jobs are expected to rise by 210,000, according to a poll conducted by MarketWatch.

Investors will also focus on the real unemployment rate. The official jobless rate has dropped to 5.4% but in the real sense, unemployment is actually at 10.8% according to U6 which is an alternative measure. U6 is a measure that’s counts the unemployed but it also includes part-time employees, accounting for nearly 17 million U.S. citizens.

The 10.8% U6 unemployment rate is an improvement from the 17.1% seen after the recession. Added to this, it is also above the 8% rate which was seen before the recession. According to analysts, it is this rate that is the main reason why we are yet to see the interest rate hike as the Federal Reserve is waiting for the U6 level to decline even further.

On Friday, investors will also be closely eyeing the workers’ wages. Previously, hourly pay increased by 3% or 4% annually but the wage rate has since been stuck at around 2% from 2010, when the recovery from the recession took hold.

While companies might be offering better pay and there are signs of wages increasing, this has not yet been reflected in the hourly pay. Added to this, Fed officials will most likely raise the interest rate when the annual wage growth moves closer or higher than 2.5 percent.

In terms of market sectors and employment, we have seen a big decline in jobs in the energy sector as a result of falling oil prices. Should this industry start to stabilize again, we could definitely see an increase in gains in overall employments.

In the last 2 months, leisure and hospitality companies such as hotels and restaurants have only added 11,000 workers. If we see an increase in this number on Friday, then it is a good sign that Americans are spending more and we could be heading for a positive summer when it comes to employment numbers.

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