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Stronger U.S. Labour Market Provides Some Tax Hike Offset

ByThe National Bank of Canada
Published 03/11/2013, 03:22 AM
Updated 05/14/2017, 06:45 AM
TTEF
0.39%

The US labour market is revving up as evidenced by February’s strong non farm payrolls. The 246K increase in private sector jobs was the second best performance in the last twelve months. Private sector services employment, with a 179K increase, reached a new record of 94.6 million. Despite hitting that milestone, the share of services in total private sector employment actually fell for the fourth straight month. That’s because the goods sector, thanks to strong job gains in cyclical sectors like construction and manufacturing, is now bouncing back sharply
after its share of private sector payrolls hit a historic low last October. With housing on the rise and factories benefiting from enhanced competitiveness (e.g. low energy costs and a competitive US dollar), those favourable employment trends could persist and offset the expected sequester-related job cuts in government. The labour market’s acceleration comes at a good time for consumers who have had to deal with the twin blow of tax hikes at the start of the year and gasoline price increases. So, consumption spending should find some support in Q1 despite the headwinds. With February's data, wage growth is tracking +4.3% annualized so far in Q1, while aggregate hours are tracking +2.3%, both consistent with a pick up in GDP growth in the first quarter after a weak end for 2012.
Stronger labour market provides some offset to tax hikes

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