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Employment is on a tear but wage growth is cooling off – what to make of the latest US jobs report?

While economists largely see it as a decent sign for the economy, they generally expect it won’t be enough to prompt the Federal Reserve to make their first interest-rate increase of 2017 in March.

Here’s our round up the following reactions to today’s jobs report:

Alan Ruskin, global co-head of FX research at Deutsche Bank:

The verdict is clear – a mixed Jan US employment report, where the detail is a little weaker than ‘the whisper’! …Plenty to build on here for Donald Trump who has tended to put a premium on manufacturing jobs. All in all a very mixed payroll report, with the breakdown tending to validate the latest Fed message of a gradual tightening and no need to rush into a hike at the next meeting.

James Athey, senior investment manager at Aberdeen Asset Management:

This is just what the doves at the Fed wanted to see. All of the numbers towards it being more difficult to justify another hike in March. Even the headline employment number won’t help. It shows more people are in employment, which you might interpret as increasing the likelihood of a hike. But at this stage in the economic cycle, you’d expect the headline employment number to be slowing a bit as we’re theoretically approaching full employment. The increase in participation and drop in wages suggest we’re not at full employment.

Neil Wilson, senior market analyst at ETX Capital:

We’ve just seen some very whippy trading in the US dollar after a monthly non-farm payrolls report that can only be described as mixed. It’s a report that will do nothing to make the Fed raise rates quicker, despite the strong-than-expected headline number.

Richard de Meo, managing director at Foenix Partners:

Seasonal challenges relating to January data should be taken into account, yet the fall in average earnings to 0.1 per cent and a rise in the unemployment rate to 4.8 per cent might cause a slight stir across the FOMC, who just this week expressed their comfort with the labour sector.

A binary assessment of upcoming Fed decisions would point to a minimal but negative impact to rate expectations, yet the stronger message to emerge is that US businesses confidence is on the rise and, in the process, already helping Trump towards his 4 per cent GDP target.

Matt Weller, senior market analyst at Faraday Research:

In essence, the fact that the US economy was able to create more jobs than expected, without a commensurate rise in wages, suggests that we’re further from ‘full employment’ than many bulls were hoping. At the margin, this report decreases the likelihood of a rate hike from the Federal Reserve in March and June.

James Knightley, senior economist at ING, takes a different view:

“There have been quite a lot of revisions to the past 12M of data but the general story remains that the US is experiencing decent growth and so the economy is creating jobs in significant numbers…We continue to forecast a March rate hike from the Federal Reserve. Today’s wage growth numbers are not particularly helpful, but with GDP growth on an upward trend, the economy creating significant numbers of jobs and inflation figures looking consistent with the Fed’s medium term aspirations, we think the case remains strong. We think this will be followed up with an additional 25bp rate rise in 3Q17.”

Copyright The Financial Times Limited 2017. All rights reserved.
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