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Fast Comment USStrong labour market keeps Fed on track for rate increase later this month

  1. Underlying employment growth strong
  2. Wage growth holds steady
  3. Fed on course for rate increase later this month
Underlying employment growth strong
Total nonfarm payroll employment increased by 155,000 in November, somewhat less than the consensus expectation of 198,000. The weak print was further amplified by a total net revision of -12,000 for the previous two months. However, the underlying pace of employment growth at close to 200,000 per month is stronger than we would usually expect at this late stage in the economic cycle, and there is nothing to suggest any significant deceleration in US employment growth at the moment. The unemployment rate was unchanged at a 49-year low of 3.7 percent last month, well below Fed officials’ current 4.5 percent estimate of the long-run natural rate of unemployment.
Wage growth holds steady
Wage increases have been slower than could be expected considering the continuing tightening of the labour market. But recently wage growth has been picking up more markedly. In November, average hourly earnings increased by 0.2 percent m-o-m, which left the y-o-y rate at 3.1 percent.
Fed on course for rate increase later this month
Overall, the labour market is strong and the latest data shows that domestic activity has continued to expand at a rapid pace. Additionally, there are signs that diminishing labour market slack is still putting gradual upward pressure on wage growth. The recent market turmoil or weakness of core inflation is therefore not enough to change the Fed’s plans to raise interest rates later this month, in our view. All in all, almost everything points to the next rate increase taking place in December, which is also largely priced in by markets.



Anders Bergvall

Anders Bergvall

Senior Economist

Thematic analysis and USA

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