U.S. employment increased less than expected in December but a rebound in wages pointed to sustained labor market momentum that sets up the economy for stronger growth and further interest rate increases from the Federal Reserve this year.
COMMENTS:SIREEN HARAJLI, CURRENCY STRATEGIST, MIZUHO, NEW YORK:
"Obviously the focus (of the market) was more on the revision from last month because if you just look at the headline number it was weaker than expected, but if you look at it overall it essentially is a flat reading. So it's pretty much in line with the data we're seeing in the U.S., growth continues to be moderate. I don't think that the payrolls report really changes the picture much. This is similar as far as the reaction that we saw in the market today."
KATE WARNE, INVESTMENT STRATEGIST, EDWARD JONES, ST. LOUIS:
"Came in line with expectations, no big surprises. You look at that and say the revisions were up about 20,000 and these numbers are not very precise. So I would say 156,000 versus 178,000 is not a big difference, not big enough to move the table in one way or the other. The unemployment rate moved up as everyone anticipated, again, not a big change. The labor force participation rate didn't change much either.
"Basically, the good news is the report is that the labor market didn't worsen in December, but no one expected that either. To me the report was very much in line with expectations and I do not think investors are going to pay much attention to the small difference between what was expected and what was delivered in terms of job growth in December.
"Hourly earnings up 2.9 percent on a year over year basis. That is important, that is probably the thing investors will pay more attention to because that something we have been expecting to see as a result of the tight labor market. It suggests the labor market really is tightening and there aren't a lot of workers coming into the job market as a result of continued solid gains in jobs.
"That is tied to inflation which does say expect the Fed to be more likely to make three moves rather than two. I don't think it is that direct a connection but the inflation numbers are something people will be watching over the next couple of months and this is a signal the slower wage growth we saw in the previous months shouldn't be taken as something saying wages aren't growing more quickly."
JUSTIN LEDERER, INTEREST RATE STRATEGIST, CANTOR FITZGERALD, NEW YORK:
"Treasuries receded off their highs after the number, but overall a fairly muted response. We're slightly lower on the day led by short-term maturities, the three-year note especially.
"After yesterday's strong rally we are giving back a small portion of those gains.
"It was a mixed report. The headline number was slightly weaker but revisions were slightly stronger. The hourly earnings number was slightly stronger, which is what many may be looking at.
"It is a payrolls day so expect some choppy price action. But overall, everyone is looking at the next administration to come in and to get further clarity on where interest rates might go. Maybe we develop a range here, but in Treasury world you look at how the U.S. dollar trades and the supply next week."
ART HOGAN, CHIEF MARKET STRATEGIST, WUNDERLICH SECURITIES, NEW YORK:
"The headline number is a little disappointing but the headline's going to get revised."
"Wages went up more than expected. When you look at the monthly numbers there's always going to be volatility. What we really look for is are wages going up. I'm very pleased with the wages number today. The initial reaction is going to be positive."
MICHAEL TEMPLE, DIRECTOR OF FIXED INCOME CREDIT RESEARCH, PIONEER INVESTMENTS, BOSTON:
"I was a little bit surprised. I thought we would have a more robust jobs growth number. I would have expected, given the strong retail season as well as the pickup that we're seeing in the energy patch activity, to have seen a stronger number, but the market seems to have shrugged it off and focused on the U6 rate as well as the increase in wage inflation."
"As we reach this full employment number, the actual number of jobs being created is going to slow down, but we will start to see increasing wage pressure, so our view is that the Fed is going to have to start grappling with continued inflationary signals, which is I think why the bond market initially reacted as negatively as it did."
CRAIG DISMUKE, CHIEF ECONOMIST, VINING SPARKS, MEMPHIS, TENNESSEE:
"I think it's good enough. It keeps the Fed the same position as well they were in. We know jobs growth has been slowing. We are now at about 180,000 a month, but you do have positive revisions. Retailers hired more people earlier than expected so the headline number coming in bit weaker than expected in December was not a surprise. There might be more slack in the labor market than what the Fed expects. The earnings number is the big takeaway. The 2.9 percent year-over-year rate and 0.4 percent rise month-over-month. That's the best we have seen of this cycle. Wage growth is firming up and if we get over 3.0 percent, the Fed would feel a lot more comfortable to raise rates further. The timing of the next rate hike will depend on the dollar and Europe where we have seen some stronger-than-expected economic data. We might see a rate hike in June and then in December."
BRIAN JACOBSEN, CHIEF PORTFOLIO STRATEGIST, WELLS FARGO FUNDS MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
"Employment situation: normal. It's taken a long time to get here, but payrolls expanding at 156,000 and wages growing close to 3 percent seems pretty normal. There's still improvement to be made, especially with the labor force participation rate being low, but conditions seem to be close to what the Fed might be happy with."
(Americas Economics and Markets Desk; +1-646 223-6300)