Soon time to tick the U.S. full employment box?

August 31, 2016

An autograph-seeker convinces U.S. Federal Reserve Chair Janet Yellen (C) to sign copies of a picture of herself with U.S. President Barack Obama, after her testimony on the economy before the Joint Economic Committee, on Capitol Hill in Washington May 7, 2014. Yellen said on Wednesday the U.S. economy was still in need of lots of support from the central bank given the "considerable slack" in the labour market, and she cited weakness in the housing sector as a fresh risk. REUTERS/Jonathan Ernst (UNITED STATES - Tags: POLITICS BUSINESS) - RTR3O6L5

Most signs are pointing to another strong set of U.S. jobs data, even if wage inflation still hasn’t picked up in the same way.

Now that Federal Reserve Vice-Chair Stanley Fischer has made it clear the central bank’s employment mandate has nearly been met, a solid set of data on the job market in August, due on Friday, could make a September interest rate rise look more likely than anyone now expects.

Seven of the top 10 most accurate forecasters for non-farm payrolls in Reuters Polls over the past year are forecasting a number higher than the already solid 180,000 median. And of the 19 Wall Street primary dealers who responded, 16 also expect a figure higher than the consensus.

Societe Generale is forecasting 255,000 jobs were created, matching July’s blowout tally, but no one in the sample of 91 ventured for anything higher.


The spread between highest and lowest forecast is relatively wide at 130,000, but only just a bit more than the margin of error on the actual data.

Plotted over the last several years, this latest run doesn’t particularly stand out, either.


But with many now saying that just meeting the consensus may be enough to tick the full employment box, it seems like a much surer bet the data, at least on jobs, are where the Fed wants them to be and that a move in September is possible.

The main challenge, as ever, is the inflation component of its two-part target remains stuck below 2 percent. Core PCE has been stuck at 1.6 percent for a few months now, with inflation expectations among the general public as well as in markets going nowhere.


Average hourly earnings data in the employment report aren’t likely to do much either. The Reuters poll suggests only a 0.2 percent rise in August, less than the 0.3 percent in July. Half of the top 10 forecasters on this measure expect either just a 0.1 percent monthly rise or no rise at all. That would bring down the annual rate, last measured at 2.6 percent. 

— with analysis by Shrutee Sarkar


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