After the surprise contraction in the first quarter,ING Economics says there is growing evidence to suggest the U.S. economy will rebound strongly in the second with 4%+ GDP growth on the cards. The labor market is strong, consumers are spending and there is now evidence that manufacturing isn’t struggling as much as feared while construction output continues grinding higher.
Any weakness in Friday’s employment report is down to a lack of workers willing and able to do the job rather than any softening demand. Job openings fell to 11.4mn from an upwardly revised 11.855mn (consensus 11.35mn), but this means there are still nearly two job vacancies for every unemployed American.
A tighter jobs market means more upward pressure on wages, which is likely to keep inflation stickier in the US than in other developed markets, ING said.
Separately, the Institute for Supply Management said its May survey found economic activity in the manufacturing sector grew in May, with the overall U.S. economy achieving a 24th consecutive month of growth. The new orders index is 1.8 percentage points higher than in April, the production index is up 0.6 percentage points, the prices index eased 2.4 points to 82.2%, and the backlog of orders index was up 2.7 points to 58.7%.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained
environment. Despite the Employment Index contracting in May, companies improved their progress on addressing moderate-term labor shortages at all tiers of the supply chain, according to Business Survey Committee respondents’ comments. Panelists reported slightly lower rates of quits compared to April. May was a second straight month of slight easing of prices expansion, but instability in global energy markets continues. Surcharge increase activity appears to be stabilizing across all industry sectors,” said Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee.