Financial News: Payroll Outperformance To Soothe Fears About Economy -

Payroll Outperformance To Soothe Fears About Economy - Capital Economics

(RTTNews) - The bigger-than-expected gain in non-farm payrolls is likely to soothe fears about the economy, while the increase in average earnings would prompt the Fed to remain focused on the upside risks to inflation, Capital Economics economist Paul Ashworth said.

Non-farm payroll employment surged by 272,000 jobs in May, data from the Labor Department showed Friday. Economists had forecast employment growth of about 185,000.

Average hourly earnings grew 0.4 percent from the previous month, which was faster than 0.3 percent economists had expected.

Read more: <a href=https://www.rttnews.com/3453121/u-s-job-growth-far-exceeds-estimates-in-may-but-unemployment-rate-ticks-higher.aspx?type=alleco target=_blank >U.S. Job Growth Far Exceeds Estimates In May But Unemployment Rate Ticks Higher</a>

Capital Economics expects public sector employment growth to weaken substantially over the summer, as state and local governments rein in spending to eliminate growing budget shortfalls.

The massive a massive 408,000 drop in household employment will embolden the bears, who have been highlighting the growing gap with payroll employment, Ashworth said.

"The latest alternative QCEW employment data, used to benchmark payrolls, do suggest that payrolls need to be revised down significantly for the second half of this year, so possibly some of the recent out-performance will prove to be illusory too," Ashworth said.

"That said, we expect post-revisions to see slower employment growth, rather than an outright decline consistent with a recession beginning last fall."

Falling job openings and voluntary quits point to a further moderation in average earnings growth to below 3.5 percent later this year, the economist added.

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