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US NFP: Too good to be true? - ING

James Knightley, chief international economist at ING, explains that December was the month of blockbuster jobs creation for US as the NFP posted an increase of 312,000 increase plus a net 58,000 upward revision to the past two months of data, but due to surge in labour participation rate, the unemployment rate rose from 3.7% to 3.9%.

Key Quotes

“Wages jump another 0.4% MoM leaving the annual rate of wage growth up at 3.2% - the highest since April 2009. This really positive report should certainly ease creeping fears in the market that the Federal Reserve may be forced to cut interest rates.”

“Now that we have data for the full year we know that payrolls growth averaged 220,000 per month, up from 182,000 in 2017 and 195,000 in 2016. We suspect payrolls growth will slow in 2019, but this more reflects the lack of supply to fill vacancies rather than a major drop-off in demand.”

“Wage growth is now 3.2% YoY and we think it will rise further, given the competition for suitable workers at a time when the unemployment rate is close to multi-decade lows.”

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