NFP Quick Analysis: Wage rises are more than a one-off - USD recovery could extend

The big news from the January 2018 jobs report is the annual rise in wages: 2.9%. Salary rises have been drawn to the 2.5% level in the past year. Each time the report showed higher annual increases, the following month saw a disappointing figure and/or a downward revision. All In another case, the report of the accelerated rise in pay was skewed by the hurricanes.

This time may be different. The monthly rise of 0.3% came in as expected for the month of January. However, this is above the 0.2% levels which were the average. More importantly, this above-average monthly rise in January was accompanied by a much more than average rise for December: 0.4%. 

The rise in wages has also managed to move the Fed’s biggest dove out of his nest: Minnesota Fed President Neel Kashkari said that if wage growth continues, it could impact rates. In December, Kashkari voted against the rate, and not for the first time.

The picture would have been brighter had the annual raise reached the round number of 3%. Nevertheless, the report has implications also at 2.9%. It is hard to see the incoming Fed Chair Jay Powell not raising rates in March. Moreover, there is a higher chance that the dot-plot of the Fed will consist of an upgrade from three to four rate hikes in 2018. 

All in all, the rise in wages is very good news for the US dollar. The greenback made attempts to recover during the past week. This rise in wages could help boost these attempts and perhaps result in a turnaround.