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Chief economist update: The devil's in the headline US payrolls number details

The US dollar weakened, so too did the yield on 10-year US Treasuries while the equity market's benchmark indices closed on the up and up as inflation expectations in Uncle Sam's county eased, calming concerns that the US Federal Reserve would reduce its policy accommodation in the very near future.

The day was June 4 - the day the US Bureau of Labor Statistics (BLS) reported that the economy generated only 559,000 jobs in May, missing consensus expectations for the creation of 650,000 to the employment heap.

A repeat of the previous month's big disappointment -- 266,000 jobs in April (revised up to 278,000 in the latest report, well-below market expectations for a nearly one million gain (978,000 to be exact). A repeat of the 'bad news is good news' view that prevailed a month ago.

But if you read the BLS's report as diligently as a crime scene investigator, you'll find that underneath that the employment report is not as dreary as the headline numbers suggest.

According to the BLS: "In May, 7.9 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic" is "down from 9.4 million in the previous month".

Yes Virginia, there were less Americans unable to work in May than there were in April.

This is in addition to disincentivised workers. We may call them slacks but they're presenting a perfectly rational response to the current situation.

As the Wall Street Journal put it last month: "Average unemployment recipient receiving federal enhancement (which continues to September) earns above the $15/hr federal minimum wage".

It's a no-brainer. Work for US$15/hour - with all the attendant costs of working - or just eat, drink and be merry and watch Netflix 24/7 while at the same time receiving higher unemployment benefits from dear Uncle Sam, thank you very much.

There's the cheque for US$1200 per person (plus US$500 per child) issued under the CARES Act in March 2020; there's the cheque for US$600 per person (US$600 per child) announced in December 2020; there's the US$1400 per person (plus US$1400 per each dependent of all ages) signed off in March 2021.

But herein lies the rub. With the increased rate of vaccination in the country and the easing of social and business restrictions, US economic momentum has shifted another gear. Companies would need to offer wages above what staying at home drinking Budweiser and watching Netflix offer.

They're doing just that. The BLS reports that: "Average hourly earnings for all employees on private nonfarm payrolls increased by 15 cents to $30.33 in May, following an increase of 21 cents in April".

"The data for the last two months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages."

This spell rising inflation.

Read our full COVID-19 news coverage and analysis here.