KBC Market Research Desk
KBC Bank
US labour market recovery broadens and is gaining strength
Next week, the Federal Reserve will meet for its last FOMC meeting of 2014. Ahead of the meeting, we provide you with an update of our Labour Market Dashboard to summarize the latest developments in the US labour market. Since the previous meeting at the end of October, two payrolls and JOLTS reports have been published, providing new insights on the health of the US labour market.
The October payrolls report showed a continuation of recent trends. More surprising was however the excellent November payrolls figure, showing an increase in hiring by 321 000, the strongest monthly jump since early 2012. Strong hiring ahead of the Christmas shopping season was part of the reason, but the details showed that strength was broad‐based. In the meantime, the unemployment rate extended its downtrend, falling below 6%, to 5.8%, edging ever closer to the Fed’s full employment rate target of 5.4%. Also the details of the household survey confirmed that the recovery is gaining strength with the broader U6 unemployment rate extending its downward trend. Finally, there were signs of life in the wage data.
Average hourly earnings rose by 0.4% M/M in November. We are eagerly looking whether the pick‐up will be confirmed in the coming months. Besides the payrolls, also the most recent JOLTS reports showed further meaningful signs of improvement in the US labour market.
A quick look at the table below shows that latest developments in our Labour Market Dashboard were very positive. Five out of our ten indicators improved further compared with the previous month (green arrows), while four stabilized and only one indicator weakened (which followed however a sharp improvement in the month before). Three indicators have met our self‐defined target, the same number as in October, but a few others are nearing the target.
To conclude, since the October FOMC meeting we are convinced that the US labour market recovery gathered strength.
Wage data picked up, there are increasing signs that employers are unable to find skilled workers and the unemployment rate is rapidly approaching the NAIRU rate. These developments were for sure also picked up by the governors of the Federal Reserve and will be heavily discussed at next week’s meeting, which might even convince the Fed to remove the “considerable time” phrase out of its forward guidance.
This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.
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