Our forecasts are designed to anticipate changes before they occur and to help you extract meaning from the noise.
January employment report: Stronger wages add more pressure on bonds
The biggest watch point coming out of the January employment report was wage growth. The broadest measure—average hourly earnings for all employees—surprised modestly to the upside in January. Up 0.3% in January, it improved to 2.9% year-on-year, placing it above consensus expectations. The earnings growth data for production and non-supervisory workers was more subdued—up only 0.1%. This is one of the widest spreads in the history of the two wage indexes and suggests wage pressure might be more significant at the high end of the labor market.
The strong employment report (200,000 jobs added in January, unemployment rate steady at 4.1%), should keep the Fed on track for a March interest rate hike. Our baseline forecast is still for three total hikes in 2018.