Aurora U.S. Payrolls Update

• We view today's print (+143K, UE at 4%) as a little dovish on the margin, primarily due to weakness in hours worked and a soft headline print. 
• But the labor market was clearly performing strongly in Q4, with 100K extra jobs in net revisions over November and December.
• At +307K, the revised December print was the best one since January 2023. 
• We are nonetheless worried about weakness in labor demand: average hours worked is now below pre-COVID levels, potentially suggesting a surplus of employed labor relative to demand. 

• Of course, this is just one data print--but the downward trend has been steady over the past two years; it is also similar to the hires rate in the JOLTS survey which has been trending downward and is also below pre-COVID levels. 
• This weakness in labor demand could grow into a concern for the Fed--and be the catalyst for the next cut. This is why we view today's numbers as dovish at the margin.
• We remain of the view that inflation is still the higher concern, and that the Fed will pause at its next meeting. However, May pricing (-8bps) strikes us as a little too hawkish following today's print. 
• Average weekly earnings remained unconcerning (from an inflation perspective) at 0.2% and the real wagebill, which we use as a proxy for consumer purchasing power, continues to grow at healthy levels. 
• In other words, despite today's soft print, the economy is doing just fine. 

• Longer-term revisions did not end up having a significant impact on the ratios, with the participation rate, employment to population ratio, and unemployment rate all being revised by 0.1%, despite 2,106,000 people being added to the U.S. civilian labor force. 
• Similarly, the annual payroll revisions gave us some new information about the past state of the economy--it was probably a bit weaker than we thought in late Q3, so the Fed jumbo cut was probably justified in retrospect. Revised June, July, and August payrolls were all in the 70-90K range. 
• But neither revision warrants a change to the Fed outlook or our estimate of the underlying health of the economy.

All best, 

Dimitris and the Aurora team.

To book a meeting with me to discuss these or any other Aurora themes contact juliet@auroramacro.com

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