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Fast Comment USWage growth jumped to a nine-year high

  1. No sign of slowing in employment growth
  2. Wage growth jumped to a nine-year high
  3. Fed still on track for rate hike in December
No sign of slowing in employment growth
Total nonfarm payroll employment increased by 250,000 in October, more than the consensus expectation of 200,000. The unemployment rate was unchanged at a 49-year low of 3.7 percent last month. There is probably more spare capacity in the labour market than historical comparisons would imply, but even the broader measure of underemployment (U6) is at a 17-year low. The underlying pace of employment growth of close to 200,000 per month at this late stage in the economic cycle is impressive, and well above the growth rate necessary to keep up with population growth. Employment growth at the current pace is likely to fuel a further decline in unemployment, in our view.
Wage growth jumped to a nine-year high
Average hourly earnings are in focus for the Fed. Although wage growth has been trending upward, the pace has been slow. Today’s data indicate slightly stronger wage growth in October. Wage growth was 0.2 percent m-o-m. Due to strong base effects, the annual rate jumped to a nine-year high of 3.1 percent from 2.8 percent in September.
Fed still on track for rate hike in December
GDP increased by 3.5 percent in the third quarter and employment growth is strong. There is also nothing to suggest any significant deceleration in US employment growth at the moment. Additionally, inflation has increased, and core PCE inflation is now running at the Fed’s 2 percent target. Overall, the economy is strong and wage and inflation pressure is building. The recent market turmoil is therefore not enough to change the Fed’s plans, in our view. All in all, everything points to the next hike taking place in December, and we expect the Fed to raise rates twice in 2019.



 



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Anders Bergvall

Anders Bergvall

Senior Economist

Thematic analysis and USA

anbe83@handelsbanken.se

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