The September jobs report was not a smoking gun for the Fed.
Nonfarm payrolls rose 156,000 in September, in line with our expectations of 160,000 but below consensus of 172,000. Thus it seems that the strong jobs reports in the summer were mainly due to the weakness in the spring. Overall, employment growth has slowed this year.
The details reveal that there is still slack left in the labour market as the unemployment rate rose from 4.9% to 5.0% and the underemployment rate (a broader unemployment measure) was unchanged at 9.7%.
It is also clear that we have not closed the unemployment gap when looking at wage growth, which continues to be subdued from a historical perspective.
Overall, the September jobs report was not the 'smoking gun' for the Fed. For now we stick to our non-consensus view that the Fed will stay on hold until H1 17 although it is a close call whether Fed will hike or not in December.
Markets have priced in a two-thirds probability of a hike by the turn of the year.
Next week we get retail sales in September, FOMC minutes from September and Yellen is speaking. All three could be important for our Fed call.
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