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US jobs disappoint, but Fed taper still likely

There are 11 million vacancies in the US so for the economy to have only created 194,000 jobs in September shows that this is a supply problem and is not demand related. The competition for workers is intense and this will push up wages and increase inflation pressures. This argues for a dialling back of the Fed stimulus on November 3rd

Despite this disappointment there was a big drop in the unemployment rate from 5.2% to 4.8% with household employment rising 526k.

The participation rate actually fell, which offers more evidence that the decline in worker participation is going to be a longer lasting story than many (including the Fed) think. Surprisingly, employment as a proportion of people of working age is still no better than the levels we saw in the depths of the Global Financial Crisis.

Wage pressures = inflation pressures = Fed taper

September’s wage gains provided more fuel to the argument that the current pace of inflation could run longer than many economists anticipate.

Average hourly earnings rose 0.6% for the month, making the year-over-year increase 4.6%. Over the past six months, wages are running at an average 6% annual gain.

Reference: Think.Ing, CNBC