US: ″Nonfarm payroll growth exceeds expectations in october″

Nonfarm payrolls increased by 261,000 in october after gains of 315,000 (revised from 263k) in september. While the headline employment change exceeded the expectations of 193,000, an upward movement was observed in the unemployment rate from 3.5% to 3.7%. The median estimate in this area was 3.6%. With this category, we see a decline in the labor force participation rate from 62.3% in september to 62.2%. While the headline data point to a stronger-than-expected momentum, it should be taken into account that rapid job gains in the services and retail-based sectors may be median, especially due to the November discounts and the Christmas effect.

If we look at the sub-items; Notable business gains occurred in healthcare, professional and technical services, and manufacturing. In october, average hourly earnings for all workers in the private non-farm sectors rose 0.4% to US$32.58. Average hourly earnings increased by 4.7% over the last 12 months. Although a monthly change is observed above the expected 0.3% increase, we observe a decline from 5% in annual wage inflation.

The numbers show that the US job market remains firm, but the remaining momentum looks set to point to a slowdown after the retail impact of the October to year-end period is erased. Recently, we have been watching the layoffs and hiring freezes in technology companies and start-ups due to many economic uncertainties and cost management. Tightening monetary conditions and recession effects with the increase in interest rates will push companies to operational reviews. The loss of momentum in employment in this period is also followed as one of the consequences of the Fed's policy. Inflation is still high on the basis of nominal expenditures, and wage inflation, which fell to 4.7% in real terms, actually means that wages are falling. This period will prioritize employees' demand for higher wages against high inflation and will force company costs.

If we look at the Fed's point of view; Not only moment loss, but also regression should be seen. Therefore, the Fed's course of action will not rapidly evolve in the opposite direction. The Fed raised rates by 75 basis points, signaling smaller rate hikes for upcoming meetings. However, Powell mentioned that the destination is still uncertain, which reinforces the idea that the rate run could be slower but longer. After strong employment data, market swap traders began pricing a 5.25% terminal rate for June 2023. Next week's US October CPI figures will signal that Fed moves should be monitored as they are based on the latest market arguments.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı