US employment gains clinch the deal for rate hike – SocGen
|US employment gains clinch Fed hike on Dec 14 as the unemployment rate has plunged to 4.6% expects Research Team at Societe Generale.
Key Quotes
“Reduced slack in labor markets
The unemployment rate fell to 4.6%, the lowest since Aug 2007, and below the Fed’s longer run equilibrium unemployment of 4.8%. In the latest Summary of Economic Projections (SEP) the Fed forecasted 4Q16 unemployment rate of 4.8% and 4Q17 rate of 4.6%. Like much of the expansion, the unemployment rate has dropped faster than anticipated by the Fed. Prevailing slack in the labor market has been a reason for slow, very gradual rate hikes by the Fed. The possibility that slack in the labor markets is less than the Fed imagined could accelerate hikes. For now, our own view of a rate hike on December 14 and two additional hikes in 2017 is on track.’
“Non-farm payrolls post a 178K gain
Compared to consensus expectations of 180K, the normally surprising employment report posted nearly on top of expectations. Modest downward revisions to October were offset by upward revisions to September. YTD, non-farm payrolls are averaging 180K/month, and that is down from a 229K/month pace in 2015. Business efforts to bolster their margins are keeping some restraint on hiring.”
“Wages soft in Nov but up 2.5% y/y—reflects gradual climb
A low unemployment rate, declining slack evident in the reduction of part-time workers for economic reasons should keep upward pressures on wages. Nov’s decline in average hourly earnings of 0.1% follows a 0.5% gain in Oct. Evidence points to a gradual acceleration in wage compensation that does not stoke inflation worries. A profit squeeze could be more immediate. The climb in real wages underscore tighter markets.”
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