NFP Quick Analysis: Even more dollar gains? Trio of strong figures point to rate hikes

• The US has gained 531,000 jobs in October, better than 425,000 expected. 
• Revisions add some 235,000 positions to the previous two reports. 
• Annual wage growth is just shy of 5% yearly, adding to inflationary pressures. 
• The dollar is up and there could be more to come. 

Spectacular – that is a proper description of October's Nonfarm Payrolls report. The economy gained 531,000 jobs, which is a significant beat on expectations for 425,000 after two badly disappointing months.

The second positive surprise is these previous two months were not as horrible. American gained 312,000 positions in September, a considerable leap from 194,000 originally reported. August was also revised up, making the total upward move worth 235,000. That is phenomenal.

Last and not least, wage growth remains robust. Average Earnings rose by 0.4% in October, as expected – but up by 4.9% YoY. Overall, there are more workers and they have more money entering their pockets. Those funds are set to push prices higher and diminish the already fading "transitory" narrative about price rises. Wage hikes are those "secondary effects" that some dismissed and are now materializing.

Good news for workers is also good news for the dollar, as the potent mix of the US economy nearing full employment and more robust price pressures could bring a rate hike sooner.

This jobs report was supposed to be an afterthought in comparison to the Federal Reserve's historic tapering decision earlier in the week – but the Fed changed the script. Chair Jerome Powell signaled that raising rates depends on the US reaching full employment, making this report more critical to the market reaction. 

It will likely continue echoing in traders' minds – his words and the data. 

Bonus figure: the Participation Rate remained stuck at 61.6%, and that somewhat takes the sting out of the drop in the Unemployment Rate from 4.8% to 4.6%. However, it also shows there are probably fewer people on the sidelines – less slack. Early retirements, new businesses and struggles of women to return to work may also be less transitory than expected. Not just inflation.

And that adds to the full employment narrative – and expectations that the Fed raises rates even before June 2022.