Kieger Multi Asset Chart of the Month

Certainly not Chairperson Powell’s “knockout, great, super strong employment report” but Still Enough for Fed to Taper.

September job growth in the US was underwhelming vs. expectations but still a green light for a Fed taper announcement by year-end. However, focusing on wage growth, average hourly earnings of 4.6% YoY (red line below) or 0.6% MoM (green line) are slightly unsettling despite the high volatility since the March 2020 crisis. We will have to wait for a continuation of the Atlanta Fed’s wage growth measure (which tracks individuals’ wages thus removing demographic and labour force composition issues) to provide further evidence of wage increases.

The larger story is that pandemic-related inflation idiosyncrasies (think: used car prices) seem to be diminishing in the CPI. However, 18 months out from a recession, other inflation dynamics should be picking up speed. Increasing wage growth should give the Fed more reason to taper, even if the headline employment figure was underwhelming.