Full Employment it is. According to non-farm payrolls figures, just 199,000 people found jobs, while there were net 141,000 higher revisions to a previous couple of months. When these data are added together, we get a job growth of 340,000, significantly below the consensus prediction of 450,000 and the 500k ‘whisper’.
Far from the expected, the last release of NFP is not correlated to Omicron because the survey itself was done pre omicron. With the 3.9% unemployment. It is more about workers’ supply scarcity. The U.S. is back to full employment and the omicron was little to do with the number.
US non-farm Payrolls (in millions)
Paying more to attract staff
As a result of the difficulty in finding suitable workers, pay rates are increasing, as demonstrated in today’s report, with the National Federation of Independent Businesses (NFIB) reporting yesterday that a record net 48 percent of small businesses increased worker compensation, with a record net 32 percent expecting to increase pay further in the coming months.
Despite the increased compensation, there is scant evidence of former workers returning to the labor force, with a participation rate of 61.9 percent and an employment rate of 59.5 percent of the working-age population. As a result, businesses are forced to recruit from competitors, which explains why the leave rate reached a new series high in November, with 3.4 percent of all private sector workers changing positions. This increases salary pressure across the board as businesses attempt to retain existing personnel by paying them more.
Given that the US economy is predominantly service-based and that employee costs are often the highest cost, this adds to inflation pressures – all the more so in a climate where businesses appear to have pricing power and may pass on these costs to customers.
All of this will increase PCE more and add pressure on the fed to be able to control the situation. We are still in a position that Fed’s less hawkish stance is very weak probability. So going long on USD here is a good choice, as it was got dumped on last Friday after a bad NFP figure released.