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Analysts at Wells Fargo, point out that despite payroll growth slowed to 134K in September (likely depressed in part by Hurricane Florence), other indicators, including a decline in unemployment and rising earnings, show no signs of cooling.  

Key Quotes:  

“Payroll growth disappointed in September with employers adding 134,000 jobs. That was likely depressed by Hurricane Florence hitting the Carolinas during the survey reference period. Relative to last year’s storms, Florence hit a less populated area and also came at the tail end of the survey week, which meant many workers in its path were still able to clock in for part of the week and be counted as employed.”

“Between the storm and typical revisions, we do not think the trend in payroll growth has slowed to the extent stated by today’s report. Revisions to recent months’ data offer some support to this view.”

“Other employment data do not give any sign of the labor market weakening, let alone to the extent of September’s payrolls. Job openings and the share of businesses reporting they have at least one position that is hard to fill sit at record highs, as does the hiring index in the ISM non-manufacturing survey. At the same time, the near 50-year low in initial jobless claims points to firms hanging on to workers, given the difficulty to re-hire later on.”

“The decline in the unemployment rate to 3.7% and upward march in wage rowth will keep the FOMC pressing ahead with rate hikes. We continue to look for the FOMC to raise rates more than the market currently expects over the next 12 months and for the committee to target a fed funds rate of 3-3.25% by the end of Q3-2019.”