US NFP consistent with a December Fed move - Wells Fargo

According to analysts from Wells Fargo, today’s NFP report was not good enough to prompt a rate hike from the Federal Reserve in September but they see it consistent with a December move.

Key Quotes:

“Nonfarm job growth in August of 151,000 is consistent with solid consumer spending in the current quarter. Moreover, historically, August has seen the biggest upward revisions later on, with the initial release underreporting by an average of 62,000 jobs since 2010. Upward revisions are not a guarantee, however, as last August hiring was revised down by 20,000 between the first and third releases. The unemployment rate remained unchanged at 4.9 percent and therefore is still within the FOMC’s estimated range of full employment.”

“One sign of tightening in the labor market is the gradual pick-up in average hourly earnings with the unemployment rate near estimates of full Employment.”

“While today’s 151,000 print provides further evidence that job growth has lost some steam this year, it should be viewed against the longer-term structural headwinds facing the labor market. The labor supply is growing less quickly than prior cycles as population growth has slowed and an aging workforce has reduced labor force participation.”

“We estimate that even with some cyclical rebound in prime participation rates, as we saw again in August, payroll gains above 100,000 should be enough to reduce slack in the labor market. Today’s report reduces the likelihood that the FOMC will raise rates in September, but the labor market remains strong enough to support a rate hike in December.”