US: Job gains support FOMC move - Wells Fargo

According to analysts from Wells Fargo, the latest labor markets numbers (gains in employment and wage growth) provide solid support for an interest rate hike in December from the Federal Reserve. 

Key Quotes: 

“Nonfarm payrolls rose 161,000 in October along with an upward revision to September’s job gains. Job growth has averaged 176,000 over the past three months, with private sector payrolls up an average of 154,000 amid strength in the service sector (top chart). These gains are consistent with solid consumer spending and economic growth around 2 percent in the fourth quarter.”

“The 0.4 percent gain in average hourly earnings in October adds to the evidence of a tightening labor market. Wage gains were widespread across industries, with only wholesale trade and financial activities posting monthly increases weaker than 0.3 percent (middle chart). Average hourly earnings are now up 2.8 percent over the past year, the strongest rate of the expansion. This pace of wage inflation adds support to the FOMC’s plans to raise the funds rate in December.”

“By most measures, the labor market has made significant strides in the seven years since the recession ended. However, some analysts argue that the labor market remains far from fully healed and question how close the labor market truly is to full employment. The U-6 rate fell to 9.5 percent in today’s report, a cycle low.”

“The cyclical improvement continues, but structural changes suggest full employment in today’s labor market may look different than in previous cycles.”