US NFP v Earnings

This chart has got many people talking. In November US payrolls grew by 321k, the highest month-on-month figure since January 2012 and the 50th consecutive month that an increase has been recorded. This extends the record run established in October when it surpassed the 48 consecutive months of growth seen between July 1986 to June 1990. While it’s clear that US economy is creating jobs, 50 months in a row is evidence enough, the one thing that is missing is wages growth. While there has been some excitement about the 0.4% increase recorded in November, it doubled expectations for a gain of 0.2% and was the largest increase since June last year, the reality is that wages have only grown 2.1% from November 2013. While labour market slack is tightening, the falling unemployment rate signals that, it is perhaps too early to say that wages growth will accelerate from here given the annual rate has been both higher and lower than the 2.1% pace of November throughout the past four years. As the saying goes, once is an anomaly, twice is a trend. Until we see several months in a row of above-consensus growth talk of an early FOMC rate tightening should be kept in check.


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