Macro of the Week – US nonfarm payrolls strong

In a reversal of the recent trend where good data is bad news for stocks, and bad data is good news, US equities rallied on Friday after the latest nonfarm payrolls report. The report showed the highest job creation figure in the last 18 months. The US economy added 313k jobs in February, although the annual growth in average hourly earnings slowed to 2.6% having spiked at 2.8% in January. The reduction in wage growth is the likely cause for the positive market reaction, since it is considered disinflationary and so was interpreted as reducing the likelihood of an interest rate rise by the US Federal Reserve. There was also an improvement in the revised figure for January, where the number was upgraded to 239k, up from 200k. The overall unemployment figure remains anchored at 4.1%. Meanwhile the participation rate improved slightly to 63% from 62.7%, as underemployment was stable at 8.2%.