NFP: Wage numbers not helpful but case for rate hike remains strong - ING

James Knightley, Senior Economist at ING, points out that despite today’s gains below expectation in wages in the NFP report, they still forecast a March rate hike from the Federal Reserve. 

Key Quotes: 

“The US employment report for January showed the economy added 227,000 jobs in the month. The market was looking for a 180,000 outcome and it is also higher than the 157,000 reading seen in December so it is a positive story. There have been quite a lot of revisions to the past 12M of data but the general story remains that the US is experiencing decent growth and so the economy is creating jobs in significant numbers.”

“Wages saw a big miss. The market was looking for a 0.3%MoM/2.8%YoY outcome, but with a 0.2 percentage point downward revision to wage growth from last month and a below expectations 0.1%MoM rise this month (0.3% was the consensus forecast) we have seen annual wage growth slow to 2.5%. Again, we suspect this is a temporary slowdown with strong employment numbers ensuring that the trend is for faster wage growth in the months ahead.”

“We continue to forecast a March rate hike from the Federal Reserve. Today’s wage growth numbers are not particularly helpful, but with GDP growth on an upward trend, the economy creating significant numbers of jobs and inflation figures looking consistent with the Fed’s medium term aspirations we think the case remains strong. We think this will be followed up with an additional 25bp rate rise in 3Q17.”