Rates set to rise again in December as US jobs rebound

As expected the labour market rebounded in the US last month after taking a battering from the storms and hurricanes of September.

Payrolls rose by 261,000 in October; less than expected, but with a net upward revision of 90,000 to earlier estimates, the level of employment is close to expectations.

The unemployment rate fell to 4.1% from 4.2% to reach the lowest level since 2000. However, wages remained flat such that the annual rate fell back to 2.4% year-on-year from 2.8%.

On this basis, the puzzle of weak pay growth continues. Although, if we focus on the broader ratio of employment-to-population, it can be seen that there is more slack in the labour market than the conventional unemployment rate would suggest. The former is running at 60.2% compared with 64.5% 17 years ago and has tracked wages more closely in this cycle.

This report means the Federal Reserve is on track to raise rates again in December and probably twice more under new chair Jerome Powell in 2018.

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