US: Slowdown in job growth poses risk to solid consumption activity outlook - Nomura

Research Team at Nomura, suggests that the data on the US consumer suggest that spending picked up in April and point to better domestic demand to start the second quarter, but the recent slowdown in job growth poses some risk to our outlook for solid consumption activity in 2016.

Key Quotes

“We expect residential investment to continue to be a source of growth over the next two years, but we expect the rate of growth to be somewhat slower in coming months, as we expect some negative consequences from demand being pulled up earlier in the year.

We still see limited scope for a rebound in business investment. Recent data on industrial activity suggest that a meaningful turnaround is still months away. Thus, we expect nonresidential fixed investment to remain weak in Q2 before gradually accelerating in H2 2016. In 2017, we expect economic activity to gradually slow to a rate that is closer to potential growth.

As for the labor market, the May employment report showed a sharp drop in the unemployment rate but a drastic slowdown in job growth. We expect the unemployment rate to stabilize slightly below 5% and job growth to pick up in H2 2016, before gradually slowing in 2017.”