US: Wages bump in January jobs report – TDS

Analysts at TDS explain that the January US jobs report was hawkish on nearly all dimensions, with payrolls surprising higher (200k vs 180k expected) and average hourly earnings printing a solid 0.3% m/m increase on the back of upward revisions.

Key Quotes

“The unemployment rate stayed steady at 4.1%. All in all, this was a robust report.”

“The upside realized in wages will not go overlooked by the Fed. While some idiosyncratic factors (such as minimum wages) may have contributed to the strength, the y/y pace is robust and we expect additional improvement on the back of a tight labor market. Further acceleration this year risks a rethink in the pace of Fed rate hikes, but more evidence will be needed. Our base case remains at three rate hikes this year.”

“Rates: Break of 2.80% level hints at potential for further selling as convexity selling discussion begins to gain traction.”

“FX: This may be the catalyst needed to trigger a relief rally in the USD. We think this will be differentiated across the G10 however and most acutely observed across the dollar bloc currencies.”