Economic wrap: nonfarm payrolls before Aussie retail sales - Westpac

Analysts at Westpac explained an economic wrap.

Key Quotes:

"US non-farm payrolls for January recorded a solid but the detail does not compel the Fed to put March on the table. A healthy +227k to start the year for payrolls, above consensus at +180k, and mixed detail – average hourly earnings printed +0.1% (0.3% expected)  - while the prior month was revised down 0.2ppts to +0.2%, painting an overall more benign wages picture. Annual benchmark revisions cloud the story. The unemployment rate rose +0.1ppt to 4.8% as participation rose from 62.7% to 62.9%, but that appears to be mostly a function of updated population estimates in the annual benchmark revisions. Household employment fell -30k for example but excluding the updated population controls would have risen a very strong 457k.

On the plus side, month to month payrolls changes in the last few months now portray a firming trend. The 3m average payrolls gain stands at +183k in Jan up handily from +148k last month, the 12m average has also stabilised at +195k, up from +187k. Mild winter weather through the US in Jan does not appear to have flattered the +227k Jan gain, those unable to work due to weather was +395k vs a 405k average for Jan.

The industry detail shows solid above-trend gains in a number of categories too: construction +36k (vs 3m avg +15k), retail trade +46 (vs 3m avg +4k), and finance +32k (vs 3m avg +14k).

Average hourly earnings paint a less threatening picture, up just 0.1%. Downward revisions in the last couple months along with a higher base effect from a year ago leave the annual rate at 2.5%. Last month, before revisions and base effects that figure was +2.9%. The soft read here is all the more unusual given minimum wage increases across a bunch of states took effect in January.

Underemployment rose from 9.2% to 9.4% but again benchmark revisions are a part of the story.

Economic Event Risks Today

Australia has retail sales data which will be the focus of markets during the domestic session. A 0.3% gain in sales for December is expected."