NFP: Wage data won’t stop a December rate hike - ING
|James Smith, Economist at ING, points out that the weak pay growth that showed the November jobs report, might raise a few eyebrows at the Federal Reserve, “but assuming this is just a blip, we still expect two 2017 FOMC hikes.”
Key Quotes:
“The scale of the disappointment was large: average hourly earnings came in at -0.1% MoM way below consensus (0.2%) and even our low forecast (0.1%). There is a bit of statistical explanation though: a calendar quirk, whereby an increase in the number of workdays between months skews average hourly earnings downwards, probably shaved around 0.1ppt off this month’s figure.”
“We also have to remember that last month’s data was really strong (0.4% MoM), so in that context the two probably net each other out. Crucially, we still think the bigger picture is a healthy one. Labour market tightness is gradually pushing up wages. Job switchers are now seeing pay rises of 4.4% YoY, according to the Atlanta Fed, which is close to pre-crisis highs. We’d expect average hourly earnings to push above 3% (YoY) in 2017.”
“So what does this all mean for the FOMC? Well, that weak wage figure will probably raise a few eyebrows among some of the more dovish Fed voters. But it would have had to have been a really disastrous jobs report to have derailed the FOMC’s plans to hike in December. In fact, assuming that the latest wage growth figure was a blip, we still think that the labour market is strong enough to support two hikes from the FOMC next year.”
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