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.
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.
This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.
This document is intended to be for information purposes only and it 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. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.
The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.
Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.
Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.
The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.
Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.