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NFP: Broad strength in hiring and rising wages - Wells Fargo

The December jobs report showed payroll rose by 312K, surpassing expectation of 177K. According to analysts from Wells Fargo, the labor market remains strong and is supportive of the FOMC raising rates further in 2019.

Key Quotes: 

“After stoking concerns about a broadening slowdown in the economy last month, the employment report for December walked back any signs of the labor market cooling.”

“Some of the strength may be traced to payback for unseasonably cold weather in November.”

“Another standout was manufacturing, which added 32,000 jobs. The sizeable increase underscored what had already been the strongest year for factory hiring since 1997. With hard and soft data on orders softening of late, however, we doubt such gains will be sustained.”

Wage growth also bested expectations, with average hourly earnings rising 0.4% in December and 3.2% over the past year. The pickup in employment as well as wages bodes well for household income and spending.”

“With the fed funds rate near estimates of “neutral” and a recent tightening in financial conditions, the FOMC has heightened its attention on incoming data. While payrolls can be quite volatile on a monthly basis, today’s report suggests the labor market remains strong, which is supportive of the FOMC raising interest rates further this year.” 

“We expect hiring to slow to an average of around 170,000 jobs per month alongside a moderation in overall economic growth in 2019.”

“Tepid labor force growth should push the unemployment rate down to 3.5% by the fourth quarter, while wage growth should strengthen further.”

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