Despite the surprise 1.4% contraction in the US economy in the first quarter, the US labour market remained very strong in April. Nonfarm payrolls increased by 428K, with private service-providing and manufacturing jobs up 340K and 55K respectively. The three-month average gain in nonfarm jobs is a very solid 523K. The unemployment rate remained extremely low at 3.6%, although it was flattered by a 0.2% decline in the labour force participation rate. Average hourly earnings growth remained robust at 5.5% on a twelve-month basis. Amid very high inflation and a robust jobs market, the Federal Reserve stepped up the pace of its monetary tightening at its May meeting. Nevertheless, real interest rates remain deeply in negative territory, suggesting further significant policy tightening may be needed to cool demand and the labour market, and bring inflation back to target.
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