The US official employment report showed payrolls increased by 261K in October, above the market consensus of 200K. According to analysts at Wells Fargo job numbers won’t move the needle much toward a 75 basis points rate hike at the next FOMC meeting. They see job growth moderating further over the coming months.
“The somewhat perplexing resilience in sectors such as manufacturing and construction could be in part explained by technical factors. We noted in a recent report that the birth-death factors to the payroll survey have been unusually large over the past year, reflecting the extraordinary rate of new business creation since the pandemic. October's beat looks to be at least in part due a record boost for this time of year.”
“We look for job growth to moderate further over the coming months. Layoffs according to initial jobless claims and the JOLTS report remain low, but discharges are only half the net hiring equation. Demand for additional workers appears to be slipping.”
“Our sense is that the FOMC would prefer to hike by "only" 50 bps in December, but hot economic data could force the Committee's hand to once again go 75 bps. On net, we doubt today's data move the needle much toward a 75 bps hike. A 50 bps rate hike remains our base case, with next Thursday's CPI print the next pivotal piece of data.”