According to economists surveyed by Reuters, the US labour market will probably add 200K new jobs, after rising by 261K in October. And this will happen with unemployment being near record lowes, as well as, weak inflation and the forthcoming large-scale fiscal impulse. The case of the American economy goes further beyond the framework of macroeconomic textbooks.
Employment gains in October were due to a decrease in temporary unemployment, which rose after the hurricanes, Harvey and Irma. November report will be the first “clean” indicator of the labour market health since the storms, which led to substantial skew in September and October NFP readings. Unemployment is expected to remain at a record low of 4.1%. The average wage growth will show a very healthy increase of 0.3% in November, after zero gains last month. In annual terms, wages will increase from 2.4% to 2.7% in November. Recall that the indicator of inflation Core PCE slightly increased in October to 1.5%, and the gap with wages strengthens the purchasing power of the nation.
The data matching with projections will once again become an excuse for criticizing the tax reform of Republicans which want to introduce a powerful fiscal impetus in the midst of economic growth. Reducing the tax on the corporation will create even greater pressure on the labour market, which already suffers from a shortage of labour. Nevertheless, companies can start investing in automation of processes, which will reduce the need for labour on the contrary.
The November NFP report will probably begin to shape expectations about the Fed’s policy in 2018, the scope of which is estimated to be 2-4 rate hikes. Recall that this year the regulator raised rates three times, which did not prevent the Dollar from weakening by 7% in relation to other major currencies.
The US economy requires at least about 90,000 new jobs every month to keep unemployment from overheating. Lack of labour is likely to lead to an increase in wages, which is expected to have a serious economic effect.
The Dollar rose on Friday to 94.00 and will probably end the week insignificant plus as the adoption of the bill on the temporary extension of financing the work of the US government has strengthened hopes for success in the tax reform.