Wage Growth Screaming

Why must Chairman Powell continue with the Fed’s rate hikes this December, regardless of political pressure?

Wage growth above 3% for the first time since 2009, that’s why. Unemployment at 3.7%, that’s why.

This morning’s jobs report all but makes the next hike in the cycle next month a fair accompli. Whether or not stocks “like” it.

U.S. hiring rebounded by more than forecast in October, annual wage gains topped 3 percent for the first time since 2009 and the jobless rate held at a 48-year low, signaling the labor market will keep driving consumption and economic growth.

Nonfarm payrolls rose 250,000 after a downwardly revised 118,000 gain, a Labor Department report showed Friday. The median estimate in a Bloomberg survey called for an increase of 200,000 jobs. Average hourly earnings for private workers advanced 3.1 percent from a year earlier and the unemployment rate was unchanged from September at 3.7 percent, both matching projections.

Trump and his party candidates ought to be out there this weekend talking about these numbers, because they’re great. They can skip the caravan stuff and Steve King can leave his Klan hood at home.

The good news is that government jobs only represented 4000 of these net gains. The rest came from everywhere else according to Bloomberg: “Payroll increases were broad-based, including 30,000 in construction, 32,000 in manufacturing and 179,000 in services; retailers added 2,400 following a 32,400 decline.”

The not so great news is that multiples for US stocks are not going to be expanding and may even continue to contract as they’ve been doing all year. Rising labor and materials costs are now a ubiquitous feature of the corporate profits landscape, and investors know it. This is more bullish for the real economy than it is for the stock market, and there’s nothing wrong with that. The stock market has been outperforming Main Street for almost a decade now.

Source:

U.S. Payrolls Rise Above-Forecast 250,000 as Wage Gains Hit 3.1% (Bloomberg)