12 Jan 2015
Solid payrolls overshadowed - ANZ
FXStreet (Bali) - ANZ FX Strategists summarize last Friday's US NFP, mentioning that soft wage growth was the negative note disappointing the market in an otherwise solid report.
Key Quotes
"US non-farm payrolls rose a strong 252k (mkt: +240k) in December, with the previous two months revised a cumulative 50k higher as well. Overall, payrolls growth averaged 289k in Q4 – the strongest of the recovery to date. The unemployment rate also declined a further 0.2ppts to 5.6% (mkt: 5.7%), although this was driven by a further fall in the participation rate, which is now sitting at the lowest level since 1978."
"Disappointingly, average hourly earnings fell 0.2% m/m with the November result revised down to +0.2% m/m (from +0.4% m/m), highlighting the absence of wage inflation so far in the recovery. However, wages appear to be approaching a point where they might start accelerating rapidly."
"Past observation suggests that the inverse relationship between wages and the unemployment rate tends only to hold when the unemployment rate sinks below 6%. Moreover, we also place a greater weight on the employment cost index (ECI) measure of wages which will be released in late January. It has shown signs of picking up recently."
"But the bigger question is whether the Fed will raise rates in the face of the hit to CPI inflation following plummeting oil prices, even though it may be temporary."
Key Quotes
"US non-farm payrolls rose a strong 252k (mkt: +240k) in December, with the previous two months revised a cumulative 50k higher as well. Overall, payrolls growth averaged 289k in Q4 – the strongest of the recovery to date. The unemployment rate also declined a further 0.2ppts to 5.6% (mkt: 5.7%), although this was driven by a further fall in the participation rate, which is now sitting at the lowest level since 1978."
"Disappointingly, average hourly earnings fell 0.2% m/m with the November result revised down to +0.2% m/m (from +0.4% m/m), highlighting the absence of wage inflation so far in the recovery. However, wages appear to be approaching a point where they might start accelerating rapidly."
"Past observation suggests that the inverse relationship between wages and the unemployment rate tends only to hold when the unemployment rate sinks below 6%. Moreover, we also place a greater weight on the employment cost index (ECI) measure of wages which will be released in late January. It has shown signs of picking up recently."
"But the bigger question is whether the Fed will raise rates in the face of the hit to CPI inflation following plummeting oil prices, even though it may be temporary."