FXStreet (Barcelona) – Reviewing the US labour market data release, Rob Carnell, Chief International Economist at ING, notes that the upbeat nonfarm payrolls result remains supportive for a July/September Fed rate hike.
Key Quotes
“Just when all the Fed speakers were sounding more and more cautious, in comes a strong labour market report and puts thoughts of tighter policy back on the agenda.”
“The headline non-farm payrolls gain was 280K, higher than the 226K consensus (ING f 240K), and comes with some nice upward revisions to previous month’s data (+32K) that make this an even better looking number. For once, the separate household survey came in almost in line at +272K, providing circumstantial evidence that this is not simply a one-off.”
“There was an unexpectedly good wages growth number too, with 0.3%mom growth in hourly wages taking wage inflation for the year up to 2.3%YoY, which it last touched briefly in August 2013, and then again for one month in July 2011. Other than these brief spikes, wages growth has not been 2.3% or above since 2009. With the pool of available labour having shrunk in each of the last four months, we may now have the conditions in place for a sustained, though modest uptrend in wages growth.”
“We are not too bothered by the tick up in the unemployment rate to 5.5%. This owes more to a 397K rise in the labour force, which lifted the numbers of unemployed by 125K. But this distorts what is clearly a positive picture, and we think it will be swiftly reversed in coming months. The broad measure of unemployment (U6) remained unchanged at 10.8%.”
“Taking all of this together, it remains difficult to see the Fed changing rates in June – they have almost already ruled it out in the May FOMC minutes and elsewhere, and we think we need to see the labour market data supported with other non-labour activity improvements first. But assuming that these are forthcoming, a 3Q15 rate hike still looks a decent bet, and could be either July or September.”
“We don’t think the FOMC will be substantially moved by recent comments by the IMF’s Christine Lagarde, namely that rate hikes would be better left until 2016. The Fed sets monetary policy for the US, not for the rest of the world.”
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