"And whilst this does not guarantee a December rate hike from the Fed – there is one more labour report before the December 16 meeting - at this stage, we feel that we would need to see a catastrophically bad November labour report for the Fed to sit on their hands again in December. We do not anticipate that."
"The payrolls headline itself was a very impressive 271K, against a consensus view for 185K, with only minor downward revisions to the September number. The unemployment rate also fell to 5.0%, with the household survey rising 320K, more than reversing the previous month’s 236K decline."
"This 5.0% unemployment rate is well within the Fed’s range for full employment, and this was, for once, nicely reflected in the wages component, where hourly wages showed a decent month on month 0.4% increase, taking the wage inflation rate to 2.5%. The last time wages growth was this good was back in 2009, when it was on the way down during the financial crisis. And although this is by no means a runaway rate of growth for wage inflation, it does mark a clear improvement from recent trends, and could hint that the Fed is now behind the curve as far as policy setting goes."
"There were no changes in the average weekly hours worked. But these have been at near normal levels for some years now, and the real question was when were wages going to respond. They now have.
The next question is, if the Fed has left it too long before hiking, will forecasters have to ramp up their expectations for Fed tightening in 2016 and 2017, and start to question the view that future rises will be “cautious”? It is too early to say with any certainty. Next month’s labour report, especially the wages series will shed more light on this. But we might see some substantially more aggressive pricing of Fed tightening next year, with consequent support for the USD and bond yields, especially at the front end."
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