
Jobs up, unemployment down, wages growth holding up
The October US jobs report looks very decent. Non-farm payrolls rose 165k versus the 75k consensus forecast and there were 84k of upward revisions to the past two months’ data. The unemployment rate dropped to 4.1% from 4.2% and wage growth rose 0.4%MoM/3.1%YoY versus the consensus prediction of 0.3%/2.9%. That certainly helps the case for a December Federal Reserve interest rate hike, expectations for which had slipped in recent days to make it close to a 50:50 call at one point. We are now back to 20bp priced for the December FOMC meeting, and we fully expect the Fed to deliver at that meeting.
The details show that, yet again, it is private education and healthcare services leading the gains (+53k), but manufacturing is showing real life with a 19k increase as it becomes increasingly competitive to produce certain products in the US. Secure and relatively low-priced energy, a strong economy, huge tech investment spending and, at the margin, tariffs, have all boosted the sector. Manufacturing has now added 86k jobs over the past five months after three consecutive years of decline. Other sectors that performed well include temporary help (+19k) and transport and warehousing (+25k), but leisure and hospitality sank 13k with construction employment falling 3k.
Cumulative job gains since December 2022 (000s)

Fed set to hike in December, followed by a long pause
The Federal Reserve is focusing more on the inflation aspect of its mandate right now, but a stronger jobs story remains important for the rate hike narrative. While we do expect a December rate rise, we continue to doubt the need for additional hikes next year. The market has moved in that direction in recent days so that it no longer fully prices additional hikes in 2027, presumably because of the big drop in energy prices and diminished fears of second-round price effects. Next week's CPI report is expected to show core CPI rising by 0.2% month-on-month, which should support that story.

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