The monthly federal employment report (NFP) is a major appointment on trading floors. On Friday, an hour before the opening of Wall Street, the December report was feverishly awaited, the day after the publication of the private firm in Human Resources ADP, which augured plethora of job creations in the private sector.
The December NFP report
In the end, the US economy created 223,000 jobs in the private sector (excluding agriculture) over the whole of December, above the consensus (200,000), but below the revised data for November (256,000). The gap in consensus was more surprising on the unemployment rate, which fell from 3.7% to 3.5% of the population, raising fears that the Fed, despite its efforts, is unable to « cool » the economic machine. Since March, this unemployment rate has been contained in a straightjacket between 3.5% and 3.7%. Yet the market reacted particularly well, counterintuitively.
Focus on the dynamics of hourly wages
What reassured operators was clearly the dynamics of hourly wages, postponing indefinitely, the scenario once feared of a runaway price / wages, the famous spiral making inflation out of control… Average hourly wages in the private sector increased in December (+0.3%), but at a much slower pace than the consensus suggested (+0.4%, the same figure as the November update). There was no slippage, therefore, on the side of average hourly wages, which increased overall by 9 cents, or 0.3%, to $32.82. Over the past 12 months, average hourly wages have increased by 4.6%. In December, average hourly wages in the private secondary sector (production) and non-managerial employees rose 6 cents, or 0.2%, to $28.07.
An immediate reaction in the sovereign bond market
In the wake of this publication, the « Treasuries 10 years, » i.e. the yields on 10-year federal sovereign bonds, fell sharply from 3.75% to 3.55% in a few minutes. Or the expression, by the market, of a clear anticipation: that the members of the Fed will be reassured, without relaxing their efforts. These figures do not call into question the nature of US monetary policy for the year ahead: it will remain firm. But to the question of the pace of the Fed Funds curve, terminal rates, and the duration of a Fed Funds on an altitude plateau, the statistic brings if not a little flexibility, a breath of fresh air.
For the most curious of you, find here the full results of the NFP (Non Farm Payrolls) survey for the month of December. An interesting cultural element on the other side of the Atlantic, which may be surprising by its incongruous character for French analysts: the statistics are also broken down by ethnic origin.
Alexandre TIXIER, for Fibee
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