US NFP: The job market is getting hotter - Natixis

Thomas Julien, Research Analyst at Natixis, notes that the US nonfarm payrolls rose by 161K in October, slightly lower than expectations (consensus: +173K and ours: +175K).

Key Quotes

“Previous two months’ figures were revised upward on net (+44K). The 3 month average in job creations decelerated from +206K in September to +176K in October.

Job creations remained depressed in the goods producing industries as the mining and manufacturing sectors continued to shed jobs. Employment gains slowed in the services industry but the trend remains solid. Within sub sectors the evolution was mixed, with employment slowing down in trade, transports and business services but accelerating in information, finance, education, health and leisure.

Details in the household survey were mixed: the unemployment rate went down as expected (from 5.0% to 4.9%) but the decline was driven by a decrease in the participation rate. On the other hand, the underemployment rate (U6: a wider indicator of unemployment) lost 0.2pts to 9.5%, its lowest level since April 2008.

The biggest surprise came from the wage dynamic: Average hourly earnings increased by 0.4% MoM (2.8% YoY) their fastest pace since the start of the recovery.

All in all, on net report is clearly a positive one. Job gains are slightly slower but still above the level that is required to make the unemployment rate go down. Even though employment growth is now slower, the acceleration in wages is a good sign for consumption prospects. In addition, if wage growth remains sustained in the coming months, the Fed will have to tighten at a faster pace next year (3 times in our core scenario).”