The jobs report was quite good, especially regarding salaries: the biggest y/y gain since 2009. Here are two opinions:
Here is their view, courtesy of eFXnews:
Oct NFP: ‘Enough Here To Be Hawkish In Terms Of Fed Expectations’ – CIBC
US employment data for October helped nudge us one step closer to a Fed hike in December, as the central bank got the more evidence of a rebound in growth that it was looking for. The payrolls gain was in line with our somewhat below consensus call, but the 161K in net hiring was supplemented by a net upward revision of 44K to the prior 2 months. Gains were in services, with the goods sector flat. The jobless rate ticked down to 4.9%, athought that was on a drop in labor force participation.
One notable feature was a healthy 0.4% rise in average hourly earnings that took the yearly change to 2.8%, continuing an uptrend that is starting to suggest we’re not that far from full employment.
All told, enough here to be hawkish in terms of Fed expectations.
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Oct NFP: ‘Clears The Bar For A December Rate Increase’ – Barclays
Nonfarm payrolls expanded by 161k in October, somewhat below our (175k) and consensus expectations (173k). Within this number, private payrolls expanded by 142k and public sector payrolls grew by 19k. The miss relative to our expectation came primarily from service sector employment, which rose by only 142k on the month, while goods sector employment was flat as gains in construction payrolls were offset by further declines in manufacturing payrolls. Soft service sector employment was driven by weakness in retail trade (-1k) and a slowdown in hiring in business services (43k versus 78k last month). A large portion of the slowing in business services came from temporary help, where employment grew by only 6k.
While headline employment growth was softer than expected, we believe it still exceeds what most FOMC members find acceptable at this stage (~150k). In addition, the employment report contained stronger readings on wage data and significant upward revisions to prior payroll growth that give the report a stronger tone. Average hourly earnings rose by 0.4% m/m in October and September wage growth was revised higher to 0.3% m/m from 0.2% as previously reported. This leaves average hourly earnings up 2.8% y/y, broadly in line with our expectation that tighter labor markets would cause wage growth to accelerate to 3.0% in 2016. The payroll proxy rose by 6.3% in October versus the Q3 average of 4.2%, which suggests the combination of modest employment growth and faster wage growth is causing income growth to accelerate. In addition to stronger wage and income growth, prior payrolls were revised 44k higher and September employment is now reported as rising by 191k (previous: 156k).
Overall, we believe the wage data and upward revisions to prior months data more than offset the softness in services employment. In our view, this report clears the bar for a December rate hike and represents some of the continued progress towards the dual mandate that the committee desires. There are still possible outcomes that could delay rate hikes into 2017, most notably election outcomes that inject volatility into financial markets, or a substantially weaker November employment report. That said, we believe the activity and inflation data clear the Fed’s hurdle rate and we continue to expect a 25bp increase in the target range for the federal funds rate next month.
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