Friday’s non-farm payrolls data revealed that the US economy added an impressive 271,000 new jobs in October. This exceeded expectations, with nearly 100,000 more people finding work than had been forecast, on average, by a group of economists.
Marking the strongest rate of job creation so far this year, October’s payrolls saw the headline unemployment rate dip to a seven and a half year low of 5.0%. At this level, the unemployment rate is within a whisker of most estimates of the NAIRU and the labour market is undeniably close to neutral. This was reflected in Friday’s earnings data, with average hourly wage growth accelerating to 2.5% in the year to October — the fastest pace since 2009.
For any members of the Federal Open Market Committee looking for further evidence before voting to tighten, last week’s data was certainly a step in the right direction. Markets agreed, with the probability of a December rate hike rising to 75% from a close to evens chance before Friday’s release. From our perspective, the need for tighter monetary policy in the US is pressing.
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