<p>The US reported March nonfarm payrolls increase of 103k, missing expectations of 185k. On average, the monthly payroll growth is 202k for 1Q 2018. Average hourly earnings (AHE) inched up 0.3% m-o-m, in-line with expectations. On a y-o-y basis, AHE rose to 2.7% in March, up from 2.6% in the previous month. Unemployment rate declined slightly by 7 bps but remained unchanged at 4.1% on a rounded basis.</p><p><span style="text-decoration: underline;">US Unemployment Rate (%)</span></p><p><span style="text-decoration: underline;"><img src="assets/images/origal_images/графмк.png" width="624" height="449" /></span></p><p><i>Source: Bloomberg</i></p><p><b><span style="text-decoration: underline;">Weather impact</span></b></p><p>The swing factor was unexpectedly harsh winter conditions in March. The winter storms had a significant impact on weather-sensitive sectors such as retail, construction, leisure and hospitality. Construction employment fell by 15k after rising 65k in the previous month. Food and beverage services employment declined by 20k in March. On the other hand, sectors that are less sensitive to weather such as the manufacturing contributed strongly to payroll growth, with a gain of 22k.</p><p><b><span style="text-decoration: underline;">Gradual wage growth</span></b></p><p>Wage growth signalled by AHE was in-line with expectations. The mining and financial activities sector led the wage gain with increase of 0.8% and 0.6% respectively. Productivity growth was flat in 1Q 2018, an improvement from the 0.8% q-o-q decline in 4Q 2017.</p><p>On balance, the weak jobs report is likely to be one-off due to the impact from harsh winter conditions. The gradual climb in wage growth is also welcome for the US Fed. It reduces the pressure for interest rates to be raised on a faster pace.</p><p><b>Edmund Chan, CFA</b></p>