Fed to ‘keep at it’ after further jobs gains

While the unemployment rate rose in October, US employers continued to hire at robust rate and stepped up wage increases, thereby necessitating further policy tightening from the Federal Reserve.



George Brown
Senior US Economist

Markets were presented with a somewhat mixed picture of the US labour market in October. Non-farm payrolls rose 261,000, higher than the 193,000 consensus, but another gradual easing from the respective gains of 292,000 and 315,000 in September and August. Also, the unemployment rate climbed from 3.5% to 3.7% despite the participation rate edging down to 62.2%. And hourly earnings advanced 0.4%, a step-up from the 0.3% seen over the previous two months.

In summary, there was something for both hawks and doves alike. On the one hand, further robust job gains and a pick-up in earnings growth suggests the labour market remains hot. But rising unemployment also adds to growing evidence of cooling conditions. Investors seem to have leant more on the latter judging from money markets. They are now marginally favouring a 50 basis point (bp) rate hike from the Federal Reserve (Fed) next month, rather than another 75 bp increase prior to today’s data.

Such a move would be consistent with the message communicated by the Fed this week. However, a step-down in the pace of rate rises is by no means a done deal. Hiring intentions remain excessively strong, with job openings climbing 437,000 in September to reverse around half of the sharp fall seen in August. Layoffs among companies also remain modest, with Challenger reporting that just 34,000 American workers were let go in October.

In this vein, the magnitude of the Fed’s rate hike in December will hinge on how the data unfolds over the coming weeks. Among the most important will be next week’s CPI figures, which will be examined for any signs of whether underlying inflation pressures are easing. But the key takeaway from the earnings season is that companies appear to still have pricing power, which suggests that the Fed’s job is not yet over and that it will have to keep at it raising rates.

Subscribe to our Insights

Visit our preference center, where you can choose which Schroders Insights you would like to receive

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.


George Brown
Senior US Economist


Please consider a fund's investment objectives, risks, charges and expenses carefully before investing. The Schroder mutual funds (the “Funds”) are distributed by The Hartford Funds, a member of FINRA. To obtain product risk and other information on any Schroders Fund, please click the following link. Read the prospectus carefully before investing. To obtain any further information call your financial advisor or call The Hartford Funds at 1-800-456-7526 for Individual Investors.  The Hartford Funds is not an affiliate of Schroders plc.

Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada.  Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada.  SFA markets certain investment vehicles for which other Schroders entities are investment advisers.

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security/sector/country.

Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit www.schroderscapital.com

SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.