October non-farm payrolls +261K vs +313K expected

October 2017 US jobs and wages data

  • Prior was -33K (revised to +18K)
  • Estimates ranged from +120K to +400K
  • Two-month net revision +90K
  • Private payrolls 252K vs +302K expected
  • Unemployment rate 4.1% vs 4.2% expected (lowest since 2001)
  • Participation rate 62.7% vs 63.1% prior
  • Underemployment rate (U6) 7.9% vs 8.3% prior

Wages data:

  • Average hourly earnings m/m 0.0% vs +0.2% expected
  • Average hourly earnings y/y 2.4% vs +2.7% expected
  • Prior average hourly earnings y/y 2.9% (revised to 2.8%)
  • Average weekly hours 34.4 vs 34.4 exp

Very weak wages. It looks like skews from the hurricanes are still a big part of the story. That drop in the participation rate is concerning.

You have two options here: 1) Disregard it and blame hurricanes. 2) Take it at face value and begin to worry that the Fed won’t be as hawkish.

Given all the other strong data, I’ll go with Option 1 but that drop in the participation rate is the only reason unemployment stayed low. Meanwhile, wages were poor, but that could also be a hurricane story.

In any case, the market is selling the US dollar, so that’s the verdict that matters.

Note that earnings also fell sharply in Oct 2012, which was also a very busy hurricane season.

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