Saturday, November 7, 2015

US NFP shows evidence of more than “some” improvement in the labor market – Wells Fargo

FXStreet (Córdoba) - According to economists from Wells Fargo, today’s upbeat numbers from the US show more evidence of an improvement in the labor market and give confidence to the Federal Reserve for a move in December.

Key Quotes:

“Analyzing the broad sweep of the jobs report, we conclude that there is evidence of more than “some” improvement in the labor market.”

“Average hourly earnings jumped 0.4 percent in October, besting consensus estimates. The unemployment rate is well within the Fed’s central tendency for full employment, and the U-6 unemployment rate also ticked down noticeably in the month. Reduced slack in the labor market is beginning to lead to increased wages, which have now risen 2.5 percent year over year.”

“Our medium-term view is that job gains are set to continue at a more moderate pace than the last two years as the expansion matures, although still remain strong enough to bring the unemployment rate down on trend as labor force growth remains weak.”

“The jump in wages in October may be overstated, but the rise should now give the FOMC confidence to move in December. Fundamentally, the pattern of wage growth has followed the low inflation low productivity patterns that are consistent with labor compensation in line with the marginal product of labor. This model has worked in this cycle—as well as in prior cycles. FOMC communication has broken down, but confidence in a December rate increase is rising.”
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