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“The US jobs market is red hot, notwithstanding Hurricane Florence effects. Strong growth, record low unemployment and rising wage pressures mean we look for four more Federal Reserve rate hikes over the next twelve months,” notes ING’s James Knightley.

Key quotes

“The September jobs report shows payrolls rising 134,000 in September, worse than the 185,000 consensus (ING was 160,000), but this doesn’t tell the true story. Hurricane Florence has clearly had an impact on the data (the BLS says 299,000 people weren’t at work because of bad weather and 1.5 million could only work part-time)) given it made landfall in the Carolinas and Virginia in the week of data collection. However, the impact is certainly far less than what we saw with hurricanes Harvey and Irma last year and the underlying story is one of real strength.”

“Wages remain on an upward trend. They were in line with market expectations, rising 0.3%MoM/2.8%YoY, but we look set to see them break above the 3%YoY rate next month, which would mark the fastest pace of wage growth since April 2009.”

“Taking it all together, the economy is on course for 3% growth, the jobs market is red hot and inflation pressures are on the rise. So while the Federal Reserve no longer describes monetary policy as being “accommodative”, it is certainly some way off from being “restrictive”. As such, we look for a December 25bp interest rate rise with three more hikes likely next year.”