4 Dec 2015
US NFP to boost confirm Fed’s December lift-off - ING
FXStreet (Delhi) – James Knightley, Senior Economist at ING, suggests that today’s US jobs report should show decent employment gains, helping to cement expectations of a 16 December rate hike from the Federal Reserve.
Key Quotes
“This week’s labour market figures have all been respectable with the ISM employment components both in positive growth territory while the ADP payrolls series came in above 200k and jobless claims continue trending lower. Therefore, in terms of the jobs figures, we expect payrolls growth of close to 200k with the unemployment rate holding at 5%, but annual average earnings growth is likely to slip to 2.3% from 2.5% due to an unfavourable base effect despite growing 0.2% MoM (it should rise strongly again next month).”
“This should be consistent with the FOMC trigger clause for higher interest rates of “some further improvement in the labor market” therefore allowing the Fed to be “reasonably confident that inflation will move back to its 2 percent objective over the medium term”.”
“A key concern that has led some officials to argue against near-term policy tightening is the strength of the US dollar. The strength of the currency has clearly hurt the manufacturing sector, by eroding competitiveness in an environment of already weak external demand, particularly from emerging markets.”
“However, the markets’ surprise at the less stimulative than expected ECB policy changes yesterday has seen the dollar weaken nearly 2% on a trade weighted basis. This perhaps, together with a strong jobs report today, paves the way for some of the more dovish members of the FOMC to soften their stance and perhaps vote for higher interest rates.”
Key Quotes
“This week’s labour market figures have all been respectable with the ISM employment components both in positive growth territory while the ADP payrolls series came in above 200k and jobless claims continue trending lower. Therefore, in terms of the jobs figures, we expect payrolls growth of close to 200k with the unemployment rate holding at 5%, but annual average earnings growth is likely to slip to 2.3% from 2.5% due to an unfavourable base effect despite growing 0.2% MoM (it should rise strongly again next month).”
“This should be consistent with the FOMC trigger clause for higher interest rates of “some further improvement in the labor market” therefore allowing the Fed to be “reasonably confident that inflation will move back to its 2 percent objective over the medium term”.”
“A key concern that has led some officials to argue against near-term policy tightening is the strength of the US dollar. The strength of the currency has clearly hurt the manufacturing sector, by eroding competitiveness in an environment of already weak external demand, particularly from emerging markets.”
“However, the markets’ surprise at the less stimulative than expected ECB policy changes yesterday has seen the dollar weaken nearly 2% on a trade weighted basis. This perhaps, together with a strong jobs report today, paves the way for some of the more dovish members of the FOMC to soften their stance and perhaps vote for higher interest rates.”