US: Unemployment rate likely to decline to 4.0% in April – Nomura

Analysts at Nomura expect the US unemployment rate to decline 0.1pp to 4.0% in April as at an unrounded 4.07% in March, the unemployment rate was only 3bp from declining to 4.0% on a rounded basis.

Key Quotes

“Strong employment growth should be more than enough to bring the unemployment rate lower.”

“Despite employment growth easily outpacing the pace required to absorb new labor market entrants from population growth, the unemployment rate has surprisingly remained at 4.1% since October 2017. Part of the recent stability stems from a pickup in the short-term unemployment rate as workers previously on the side-lines re-join the labor force. The labor force participation rate (LFPR) in March ticked down by 0.1pp to 62.9% but remains within the 62.6-63.0% range of the past two years, despite downward pressure from an aging population.”

“We think most of the aggregate demand impulse this year will result in lower unemployment as firms draw on unemployed workers to keep pace with production, bringing the headline unemployment rate down to 3.6% by end-2018. However, a notable number of workers remain out of the labor force while reporting wanting a job, suggesting that there may be room for LFPR to improve further.”