Fed still on course for December hike after jobs report
Quickview: The latest US non-farm payrolls show robust jobs growth although wage growth remains subdued.
8 December 2017
After a couple of months where the figures were distorted by hurricanes, this report was eagerly anticipated. However, there were still surprises: non-farm payrolls rose by a stronger-than-expected 228,000 in November (195,000 expected) whilst wage growth remained subdued at 2.5% year-on-year (2.7% expected).
It is quite possible that weather effects are still skewing the numbers, but it looks very much as though the combination of robust job growth and subdued wages continues.
Still some spare capacity
We have focused on the employment/population rate as a measure of labour market slack and this fell from 60.2 to 60.1, indicating that the steady increases in participation seen earlier in the year may have temporarily stalled.
The rate remains well below pre-crisis levels and is consistent with some spare capacity, unlike unemployment which at 4.1% is still signalling a tighter labour market.
On course for December rate hike
As far as the Federal Reserve is concerned this report will not change the likelihood of a rate rise next week with a 25 basis point hike expected. We look for three rate hikes in 2018, although expect to see greater inflationary pressure from wages during this period.
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.