NFP leaves the FOMC in a bit of a gray zone – Wells Fargo


The November employment report showed an increase in payrolls of 210K, significantly below the 550K expected. According to analysts at Wells Fargo, this report was a clear disappointment in that nonfarm payrolls were well-below consensus expectations. They add that a slower pace of wage growth may slightly ease some concerns about a wage-price inflation spiral.  

Key Quotes: 

“With just one final employment report left in 2021, nonfarm payrolls are roughly four million jobs below their pre-pandemic level. Job growth is still easily outpacing the slow pace that the U.S. labor market experienced during the recovery from the 2008-2009 financial crisis.”

“In our view, this morning's employment report leaves the FOMC in a bit of a gray zone. Key Fed officials have been talking up the prospect of a faster taper in recent weeks, with a possible policy shift occurring as soon as the December 15 FOMC meeting. This morning's report was a clear disappointment in that nonfarm payrolls were well-below consensus expectations. In addition, a slower pace of wage growth may slightly ease some concerns about a wage-price inflation spiral.”

“The FOMC will clearly be discussing a faster taper at its next meeting, but this morning's report gives the Fed an out if it would like to wait an extra six weeks until its following meeting in late January 2022.”

“The Omicron variants adds additional uncertainty to whether job growth can rebound to a more robust pace through the winter as health concerns flare up again. With still so little known about the severity of the new variant at this stage, we continue to expect hiring to remain solid.” 
 

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