Inside October’s US Jobs Report

Continuing claims increased +17-K to 2 163-K in the week ended 23 October.

Challenger estimated that the number of jobs cut fell -1.3% Y-Y in October, while the preliminary Non-Farm productivity rose 1.6% SAAR in Q-3. Unit labor costs increased 1.4% SAAR during the frame.

The US employment report out Friday

The October Employment report passed expectations increasing the likelihood of a fed funds rate hike at the December policy meeting to 69.8% from Thursday’s 58.1%.

Specifically, October NFPs came in at 271,000 while the consensus expected a reading of 181,000.

Labor force growth, with GDP growth of 2% is good enough to keep the jobless rate moving down.

Most importantly, the Key missing ingredient in the jobs report, wage growth, may be starting to move as well. Average hourly earnings up 0.4% M-M, 2.5% Y-Y.

The labor force participation rate held at 62.4% for the 2nd month running.

These jobs numbers should at least give the FOMC some hope that their 2% inflation growth target may happen sooner rather than some time in the way distant future.

The importance of the employment report is its implication on Fed’s rate hike schedule.

The market had priced in a higher chance of rate hike in December since Fed’s hawkish statement last week.

This followed Fed Chairwoman Janet Yellen’s reinforcement of the possibility earlier this week.

Atlanta Fed president Dennis Lockhart echoed with some hawkish comments in a speech in Switzerland. Noting, “going into that (October) meeting, I felt a successful outcome would be expectations aligning with the view that ‘liftoff’ at our upcoming December meeting is a possibility, but not a certainty”. He suggested that he is “not concerned that the FOMC is behind the curve. Liftoff remains a close call”.

Have a terrific weekend.

HeffX-LTN

Paul Ebeling