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US wage growth still subdued – Danske Bank

FXStreet (Edinburgh) - Allan von Mehren, Chief Analyst at Danske Bank, assesses the recent US Payrolls results, focusing on the wage growth.

Key Quotes

“The US posted a solid job report showing job gains of 248,000 in line with our estimate of 250,000 (consensus: 215,000).,, The three-month moving average now stands at 224,000, a somewhat better picture following last months’ report where it was 207,000 (prior to today’s revisions)”.

“The unemployment rate showed a marked improvement from 6.1% to 5.9% supported by stronger employment in the household survey of 232,000. A decline in the labour force also contributed to the lower unemployment, though, as 97,000 fewer persons were in the labour force in September”.

“The Fed’s expectation that more people will come into the labour market as the job market improves has yet to be seen. This will give the Fed hawks some ammunition that the Fed needs more flexibility to react if it turns out that there is less slack than expected”.

“There was also a bit for the doves in the report, though, as wage growth was weak at 0.0% m/m and 2.0% y/y (expected 2.2% y/y)”.

“Bottom line: the job market is quite robust with payrolls now better in line with other labour market indicators. Unemployment is on track to reach the Fed’s NAIRU estimate of 5.4% in early Q2 15 in contrast with the Fed’s forecast of end-2015. Participation continues to decline, pointing to less slack in the economy than the Fed may perceive but at the same time wage growth remains subdued”.

“We continue to look for the first hike in April 2015”.

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