NZ: It’s all about those curves - ANZ

Analysts at ANZ note that US non-farm payrolls were fairly solid for November. Employment rose 228k and unemployment held steady at 4.1%.

Key Quotes

“However, average earnings disappointed rising 2.5% y/y (vs expectation 2.7% y/y). In a nutshell, economic and employment momentum remains very solid, but wage growth is subdued in the context of the broader environment. While this might dumbfound historical economic thinking such dynamics are something New Zealand has become well accustomed. Namely the Philips curve is very flat despite broader economic momentum red lining.”

“The reasons for this flattening have included inflation expectations being well anchored, technological change, global integration of supply chains, increased labour mobility and low global inflation. So it would seem many of these same reasons can equally apply to the US. It’s unlikely to deter the Fed in the short-term though as they take the opportunity of above trend growth to normalise interest rates gradually towards some perceived neutral rate and give themselves some future wiggle room when the next downturn occurs.”