11 Jan 2016
US: Strong payrolls, but wages disappoint - ING
FXStreet (Delhi) – Rob Carnell, Chief International Economist at ING, notes that a very strong US December payrolls survey vindicates the FOMC decision to raise rates in December.
Key Quotes
“Payrolls rose by 292k in December. However, aside from this strong headline, there is not much else to get too excited about. The unemployment rate stood unchanged at 5.0%, still very low by any standards.
One considerable disappointment in this survey, and perhaps a more important one as far as the pace of future fed hikes is concerned, is the wages figures. These grew at only a 2.5% YoY rise, and were flat over the month in December. Consensus had been looking for a modest 0.2% MoM increase, which would have taken wages into a range they had not inhabited since before the financial crisis. Instead, wages still seem to be struggling to rise. There was also no change in the average workweek, which tends to support the notion that wage pressures remain subdued, as increased hours frequently indicate a tight labour market and building wage pressures.
Consequently, and even with the strong headline payrolls figure, we don’t think these figures support a March rate hike, talk of which had been building over the past week following strong Non-manufacturing ISM and ADP data. Our house forecast for the next hike in June is still, we think, a more likely outcome.”
Key Quotes
“Payrolls rose by 292k in December. However, aside from this strong headline, there is not much else to get too excited about. The unemployment rate stood unchanged at 5.0%, still very low by any standards.
One considerable disappointment in this survey, and perhaps a more important one as far as the pace of future fed hikes is concerned, is the wages figures. These grew at only a 2.5% YoY rise, and were flat over the month in December. Consensus had been looking for a modest 0.2% MoM increase, which would have taken wages into a range they had not inhabited since before the financial crisis. Instead, wages still seem to be struggling to rise. There was also no change in the average workweek, which tends to support the notion that wage pressures remain subdued, as increased hours frequently indicate a tight labour market and building wage pressures.
Consequently, and even with the strong headline payrolls figure, we don’t think these figures support a March rate hike, talk of which had been building over the past week following strong Non-manufacturing ISM and ADP data. Our house forecast for the next hike in June is still, we think, a more likely outcome.”