Fed: lack of wage and price pressures do not preclude further tightening - NBF

Krishen Rangasamy, analyst at National Bank of Canada, points out that the recent NFP is consistent with continued economic expansion in Q1 and adds that lack of wage and price pressures do not make impossible more monetary tightening from the Federal Reserve. 

Key Quotes:

“The U.S. labour market continues to boom in synch with a buoyant economy. The establishment survey showed non-farm payrolls rising a stunning 313K in February, the biggest monthly increase since the summer of 2016, boosted by broadbased gains in the private sector. Solid gains in cyclical sectors like construction and manufacturing, as well as record temporary employment are all very much consistent with continued economic expansion in Q1.”

“The household survey was also very strong (+785K) with massive gains in full-time employment which hit a new record in February, and the highest labour force participation rate in five months keeping the jobless rate unchanged at 4.1%. The only blemish in an otherwise strong employment picture is wage growth which remains soft, with a year-on-year print of just 2.6% in February.”

“The goods sector (manufacturing in particular), which is the most exposed to international competition and hence under the most pressure to manage costs, continues to pull back wage growth. But as the Fed showed last year, the lack of wage and price pressures do not preclude further monetary policy tightening especially if it is confident economic growth and hence inflation will pick up.”