Back
13 Mar 2015
Fed won’t wait for wages to pick up before taking action – KBC
FXStreet (Barcelona) - The KBC Bank Research Team views that with US labour market booming and wages posting a decline, the Fed won’t wait for wages to pick up before taking action for policy normalization.
Key Quotes
“Both the January and February payrolls report surprised friend and foe. In January, the positive surprise was mainly based in the revisions, while in February payrolls growth picked up to 295 000.”
“Also the unemployment rate extended its downward trend, falling to 5.5% in February and entering the Fed’s full employment rate target range between 5.6% and 5.2%."
“Despite excellent payrolls reports, which point to a flourishing labour market, there remains one missing link: wage growth! In January, average hourly earnings picked up by 0.5% M/M, supported by an increase in minimum wages, but wage growth slowed again to 0.2% M/M in February. Annually, wage are up by 2.0% Y/Y, well below the 3.5% Y/Y the Fed envisages.”
“If the current pace of payrolls growth continues however, we it might only take months before wages will start to pick up.”
“Besides the payrolls, we received also two JOLTS reports since the previous FOMC meeting. After a strong December report, January JOLTS data were more mixed with especially the hires rate disappointing.”
“To conclude, since the January FOMC meeting the US labour data improved significantly, indicating that the US labour market is booming. The unemployment rate has entered the Fed’s the NAIRU range, but wage growth still is the missing link.”
“We believe however the Fed won’t wait for wages to pick up before taking a further step towards policy normalization.”
Key Quotes
“Both the January and February payrolls report surprised friend and foe. In January, the positive surprise was mainly based in the revisions, while in February payrolls growth picked up to 295 000.”
“Also the unemployment rate extended its downward trend, falling to 5.5% in February and entering the Fed’s full employment rate target range between 5.6% and 5.2%."
“Despite excellent payrolls reports, which point to a flourishing labour market, there remains one missing link: wage growth! In January, average hourly earnings picked up by 0.5% M/M, supported by an increase in minimum wages, but wage growth slowed again to 0.2% M/M in February. Annually, wage are up by 2.0% Y/Y, well below the 3.5% Y/Y the Fed envisages.”
“If the current pace of payrolls growth continues however, we it might only take months before wages will start to pick up.”
“Besides the payrolls, we received also two JOLTS reports since the previous FOMC meeting. After a strong December report, January JOLTS data were more mixed with especially the hires rate disappointing.”
“To conclude, since the January FOMC meeting the US labour data improved significantly, indicating that the US labour market is booming. The unemployment rate has entered the Fed’s the NAIRU range, but wage growth still is the missing link.”
“We believe however the Fed won’t wait for wages to pick up before taking a further step towards policy normalization.”