Prepare For Liftoff; Jobs Report Good Enough To Warrant Hike

“She’ll do”. Or maybe “good enough” is the better description.

The US economy added 161K jobs in October, missing consensus of  173k  (forecast range +105k to +208k). September’s print was revised up to 191K from an initial reading of 156K. Here are the highlights via Bloomberg:

  • Nonfarm payrolls, net revisions, added 44k from prior two months
  • Participation rate 62.8% vs prior 62.9%
  • Avg. hourly earnings m/m 0.4%, est. 0.3%, prior 0.3%
    • Y/y 2.8%, prior 2.7% est. 2.6%
  • Nonfarm private payrolls rose 142k vs prior 188k; est. 170k, range 130k-200k from 39 economists surveyed
  • Manufacturing payrolls fell 9k after falling 8k in the prior month; economists estimated -4k, range -8k to 5k from 19 economists surveyed
  • Unemployment rate 4.9% vs prior 5.0%; est. 4.9%, range 4.8%-5% from 82 economists surveyed
  • Underemployment rate 9.5% vs prior 9.7%
  • Change in household employment fell 43k vs prior 354k

The better than expected wage growth is the focal point and would seem to all but cement a December hike. The following is from BNY Mellon:

“The report does not contain anything to deter the Fed from raising rates in December. Market reacted ‘marginally’ and as expected to increasing rate hike expectations, with yields slightly higher in the short end and curve a bit flatter. While data points to a hike, political environment remains ‘far from predictable’ and is still the ‘largest influence on risk taking.’”

Yes, “the political environment remains far from predictable,” as evidenced by Donald Trump’s reaction to the report:

TRUMP AIDE: ‘DISASTROUS’ JOBS DATA SHOWS OBAMA-CLINTON FAILURE

Here’s some color from various analysts via Dow Jones:

By Anna Louie Sussman In the last major economic data point to drop ahead of Tuesday’s election, Friday’s jobs report showed 161,000 nonfarm jobs were added in October, according to the Labor Department. Average hourly wages posted their biggest annual growth since mid-2009. Here are some reactions from economists and analysts: “As the job market gets tighter, firms are responding to tougher competition for workers by raising pay. This is a big positive for income growth, consumer spending, and the overall economy.” — Stuart Hoffman, PNC Financial Services “The October employment report was nothing special….This report leaves expectations for a Fed rate hike in limbo, which could prove mixed for markets today. The report was modestly positive, but not strong enough to provide a full green light for a December Fed rate hike.” — Jason Schenker, Prestige Economics LLC “The October jobs report was as good as an optimist dared hope for…With hourly earnings up 2.8% year-over-year, the fastest since the crisis, workers are sharing the benefits. If you wanted to show that the economy is still getting better for the typical voter, this report gives you what you needed.” — Jed Kolko, Indeed.com “Unfortunately, manufacturing job growth remains virtually nonexistent. Many of those separated from this sector for a long time, perhaps lacking sufficient meaningful skills to get back into the workforce, feel like their government has forgotten them. In this report, we see that the number of long-term unemployed, meaning those jobless for a half-year or more, was unchanged at two million. They account for one-quarter of the unemployed.” — Mark Hamrick, Bankrate.com “The solid gain in employment and the acceleration in average hourly earnings growth in October will increase expectations that the Fed will hike interest rates in December (assuming that the election doesn’t throw a spanner in the works).” — Paul Ashworth, Capital Economics ” The trend in wage growth is rising, and we expect further gains next year as the drag from low headline and core inflation fades and people seek bigger nominal increases, in order to maintain real wage growth. With the labor market very tight, employers will struggle to resist.” — Ian Shepherdson, Pantheon Macroeconomics RELATED U.S. Adds 161,000 Jobs in October; Jobless Rate Ticks Down to 4.9% Hilsenrath: Jobs Report Sets the Stage for December Rate Increase

Steady gains in hiring and a small decline in the jobless rate last month keep the Federal Reserve on track to raise short-term interest rates at its December policy meeting.

Employment gains were in line with the pace of recent months—161,000 more jobs in October, compared with an average of 181,000 a month for the year as a whole. That should fit the Fed’s view that the labor market has “continued to strengthen,” as officials said in a statement released Wednesday after their two-day policy meeting.

In the same statement, they held rates steady but said job numbers in this ballpark had strengthened the case for lifting them.

Meantime, wages are showing surer signs of rising, meaning slack in the labor market and the broader economy is gradually diminishing. Americans in private-sector nonfarm jobs earned an average $25.92 an hour in October, up 10 cents from the prior month. That put wages up 2.8% over the past year, the strongest 12-month gain since mid-2009.

The jobless rate, at 4.9% in October, was a notch above the 4.8% average that officials expect for the fourth quarter as a whole. Meantime, the broader “U6” measure of unemployment, which includes discouraged and involuntary part-time workers, dropped to 9.5%—its lowest point since April 2008, further contributing to the diminished slack narrative.

Fed officials will have one more jobs report to peruse before their next policy meeting Dec. 13-14, in addition to new data on consumer spending, inflation, output and other economic trends. Expect them to stick to the message in the weeks ahead that a December rate rise is coming, with a gradual pace of increases to follow.

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One thought on “Prepare For Liftoff; Jobs Report Good Enough To Warrant Hike

  1. WHAT will .25% really do? How about nothing…. KEEP IN MIND THAT THE RATS HAVE BEEN PUSHING THE HEROIN BAR FOR SO LONG THE JONES-ING WILL CONTINUE ON AND ON UNTIL AS MUCH AS THESE CROOKS CAN GET AWAY WITH. JUST A THOUGHT.

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