Moderation in payroll growth unlikely to alter 2018 FED rate hiking path


The latest labour market data are in line with our baseline scenario, which foresees continuous, solid economic growth while wage pressures are likely to rise.

Workers’ earnings, in the context of an overall economy which is close to full employment, are likely to strengthen further in the future, not stopping at the 0.3% monthly increase recorded in December.

As to payroll growth, we note that the deceleration in job growth was focused in the service sector. Private sector goods producing industries added solidly to jobs growth (+55k), with notable strength seen in construction (+30k) and manufacturing (+25k) sectors.

Other reports – including the latest FOMC minutes released – do not change our interest rate forecasts, and we continue to expect four 25 basis points hikes by the FED this year, the first rate hike likely to occur in March. More in the details, the FED minutes reveal that ‘a few’ members wanted a rate hike more than the median FOMC forecast (three rate hikes) and that ‘many’ FOMC members expected cyclical pressures to rise inflation pressures.

Gero Jung – Chief Economist – Mirabaud AM