The U.S. job market is consistently beating expectations

March 5, 2015

The evidence clearly shows that the U.S. job market now is consistently beating rising expectations, which should give pause to those doubting an interest rate rise is coming from the Federal Reserve later this year.

Including revisions, it has been well over a year since there was a considerable disappointment in monthly non-farm payrolls hiring data.

NFP - 2 year history










While forecasters appear to be reluctant to expect more explosively strong hiring in the February data after one of the best sets of job data in many years, it is clear that the most pessimistic among them have been many thousands of jobs lower than actual hiring for well over a year too.

Over the same period, in several instances, the most optimistic forecaster hasn’t been optimistic enough.

NFP - min and max










But there are two notable points in the latest set of forecasts collected by Reuters Polls.

First, it’s been about a year and a half since the highest forecast collected for the unemployment rate was higher than what was collected the month before.

NFP - unemployment rate










And the consensus forecast for monthly average wage growth, after breaking more than four years of consistent 0.2 percent consensus forecasts, is back at 0.2 percent. 

NFP - average earnings










This might suggest, as most economists are saying, that we should expect a decent set of non-farm payrolls data on Friday that show no deviation from the pace of strong job growth and a continued relatively tame set of implications for wage growth.

But the trend is pointing to a jobless rate of 5 percent or below by the end of this year. Unless the rule book gets re-written, an unemployment rate that low will necessarily generate the kind of wage growth that will get inflation on the rise.

The proportion of investors and traders in financial markets who say they believe that will happen appears to be smaller than the proportion of rate-setters on Federal Open Market Committee.




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