US NFP: Despite the negative headline, Fed still has the green light for December - Wells Fargo

After today’s NFP report, analysts from Wells Fargo consider that the outlook for jobs/personal income/consumer spending remains optimistic and they see that the Federal Reserve still has the green light for a rate hike in December, despite the negative reading in payrolls. 

Key Quotes: 

“Nonfarm payrolls fell 33,000 in September, with the three-month average slipping to 148,000 jobs. Despite the weakness, job gains in recent months and uptrend in wages are good for consumer incomes and consistent with 2.5 percent economic growth in the third quarter, and Fed policy as currently projected for a December rate hike.”

“Over time hiring in the services sector remains solid. In the goods sector, manufacturing and construction employment have continued to show gains over the past four years in contrast to the volatility witnessed, especially in manufacturing jobs, in the prior two expansions. Also reassuring has been the strength in the employment components of both the ISM manufacturing and non-manufacturing surveys this year.”

“Despite the focus on nominal wage gains, the real story for the American household is that real wages continue to rise and thereby boost household real incomes and consumer spending. Nominal average hourly earnings rose 0.5 percent in September and are up 2.9 percent over the year. We interpret this gain as a shift in the mix of jobs where lower wage leisure and hospitality workers fell 111,000 in September.”