{LONGTERMINVESTORS} Fwd: US NFP: Headline number slips; details remain encouraging

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From: <research@icicibank.com>
Date: Fri, Feb 5, 2016 at 8:37 PM
Subject: US NFP: Headline number slips; details remain encouraging
To: stockdesai@gmail.com

US Non-farm payrolls (NFP) rose less than expected by 151K in January. However, the 3-month average continued to remain above 200K. Earnings resumed their growth, coming in at 0.5% MoM in January. Unemployment rate edged down to 4.9% from 5.0%. Incoming domestic data and developments in global markets will remain crucial in determining the policy move in March. Jan-NFP below expectations; 3-month average continues to stay above 200K US non-farm payrolls (NFP) came in sharply lower than expected, increasing by 151K in January. The December print was revised lower to 262K (from 292K earlier). However, the November print was revised up, taking the total November-December revisions to -2K. The less volatile three-month average NFP print slipped to 231K (prior: 279K). However, the above 200K print reinforces the continued labour market recovery. January NFP fell below market expectations Source: Bloomberg, ICICI Bank Research Private service-providing sector proves to be major laggard Decomposition of the payrolls data shows that private service-providing segment posted the steepest losses. Across the board declines (over the previous month) were recorded in this segment with educational services, transportation and warehousing, professional and business services proving to be the major laggards. Private manufacturing employment gains remained subdued with construction sector weighing on job additions. Meanwhile, Government payrolls turned negative, shaving 7K off the January NFP print. Wage growth resumes After posting a flat reading in December, average hourly earnings resumed their growth, coming in at 0.5% MoM. On a year-on-year basis, wage growth edged down to 2.5% vs. the prior revised print of 2.7%. Meanwhile, the average weekly hours worked rose slightly to 34.6 from 34.5. Earnings growth resumed in January Source: Bloomberg, ICICI Bank Research Unemployment rate falls; Participation rate sees slight uptick According to the household survey data, the unemployment rate fell further to 4.9% from 5.0% in December. Lower unemployment coupled with the slight increase in labour force participation rate (from 62.6% to 62.7%), continued to indicate diminishing labour resource underutilisation. Meanwhile, the U-6 unemployment rate (which is a broader measure that includes part-time and discouraged workers) remained unchanged at 9.9%. Markets react on upbeat wage and unemployment print Going on a weak footing into the data release, the Dollar index saw some support as upbeat wage growth and unemployment data aided sentiment. The DXY index rose to ~97.14 levels vs. ~96.32 levels seen prior to the data release. The benchmark 10Y US Treasury yield rose sharply to 1.89% levels from 1.83% levels. Meanwhile, the 2Y yield displayed a similar move. Incoming data to remain key US economy continues to remain on its path of gradual recovery with diminishing labour underutilisation. However, the recent volatility in global financial markets and soft US data prints (Q4 advanced GDP print, ISM non-manufacturing, etc.) have kept markets in a flux and reduced odds of a rate hike in March (vis-à-vis the start of 2016). Going ahead, incoming domestic data and developments in the global space will remain crucial in determining the policy action. Regards, ICICI Bank Contact: Niharika Tripathi (+91-22) 2653-1414 (extn: 6943) niharika.tripathi@icicibank.com ​

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CA. Rajesh Desai

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