U.S. employers boosted hiring in November and the unemployment rate dropped to a more than nine-year low of 4.6 percent, making it almost certain that the Federal Reserve will raise interest rates later this month.
MARK CABANA, HEAD OF U.S. SHORT RATES STRATEGY AT BANK OF AMERICA MERRILL LYNCH IN NEW YORK:
"All in all, I think that the market is probably right to respond the way that it did, but given the declines in the unemployment rate and given how tight the labor market is, I think that it would be surprising if we didn't see some continued upward pressure on earnings going forward."
"Absolutely, I think that the street largely believed that the Fed was going to be going in December regardless of this number given the cumulative progress the Fed has seen on the labor market side. Given that the print was largely in line with expectations, with the exception of average hourly earnings, suggests that they will almost certainly go in December."
"I think our economists have been concerned that we might see a little bit of a pullback in some parts of average hourly earnings given the increase we saw last month in a few sector such as utilities, mining, and information services, so this doesn't come as a huge surprise, but I think it's something the market will keep an eye on going forward, just how resilient any further increase in earnings could be. The decline in the labor force participation rate, that's one of the contributors to the decline in the unemployment rate, so I think the Fed would much rather see labor market slack diminish, but the decline in the labor force participation rate suggest that diminishment may not be as comprehensive as they might like."
"I think that the Fed certainly is going to wait and see what the ultimate stimulus out of DC looks like before revising any thoughts that they have on the pace of 2017 rate hikes, but I think they're quite comfortable with what they've signaled in the dots for next year, which is two hikes."
"The average hourly earnings miss, it's something the Fed is going to be watching going forward, but I think that overall the fact that employment growth continues to be robust, is going to give the Fed confidence this month and then looking to further tighten policy next year as well."
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ, NEWPORT BEACH, CALIFORNIA:
"A solid jobs report that will further encourage the Federal Report to hike rates in mid December. Were it not for the less strong wage growth, this report would have also inclined the Fed to be aggressive about the future path of rates given the strong improvement in the unemployment rate and the decline in the participation rate."
JIM VOGEL, INTEREST RATES STRATEGIST, FTN FINANCIAL, MEMPHIS, TENNESSEE:
"Payrolls offered just enough disappointment to bring quick (Treasuries) short-covering after a mid-week selling spree. While the numbers are more than adequate for both the Fed and economic optimists, there's little reason to press this morning for higher rates into a possible risk event this weekend (Italy's referendum)."
SHANNON SACCOCIA, HEAD OF ASSET ALLOCATION, BOSTON PRIVATE WEALTH, BOSTON:
"Our view is that, aside from tax and death, a December hike is a certainty and it's priced into the market at this point. This report will not upset that decision heading into their meeting in a couple of weeks."
HEIDI LEARNER, CHIEF ECONOMIST, SAVILLS STUDLEY, NEW YORK:
"The big surprise is the big downward movement in the unemployment rate at 4.6 percent. I still think that the calculus for the Fed is to go in December, and I think at 4.6 percent people have to question at what point are we going to see those wage increases.
"We'll see whether that pushes cap rates higher. There's still very strong overseas demand, but I don't think that is as immediate in terms of any upward pressure on cap rates but certainly financing would be the main channel. It's going to be more expensive. I would say my money is on December."
DENNIS DE JONG, MANAGING DIRECTOR, UFX.COM, LIMASSOL, CYPRUS:
"We've become accustomed to a positive non-farm payroll report being the starting pistol for a sprint towards an interest rate hike but, regardless of today's data, the Fed was already out of the starting blocks. U.S. data has generally been solid in the second half of the year and the Trump effect has been more positive in the markets than was expected. Although there is still widespread global uncertainty, the U.S. economy remains resilient and there appears to be no reason for Janet Yellen and her colleagues to delay any further."
PAUL CHRISTOPHER, HEAD GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS:
"The dollar is off a little bit, maybe there was some disappointment, a stub of the toe, so to speak. But this isn't going to stop the Fed, we think, from raising three times between now and the end of 2017, including December. If you look at things like the unemployment rate it hasn't changed much since even August of 2015. Wages had a little bit of a stronger run in the earlier part of the autumn, they are only in a 2.5 percent range on a year over year basis, there is some fluctuation there. This looks to me like a stub of the toe for this rally but it doesn't really change the big picture.
"It wasn't so much the November number but the prior number was revised down by about 19,000 jobs. The pattern of revisions has been stronger so that might also be a bit of a surprise this time. Considering how bullish the market has been on growth, jobs, thinking about the Fed and rates, this might give a little bit of a pause to think more about that."
STOCKS: S&P e-mini futures ESc1 dip
BONDS: 2- US2YT=RR and 10-year US10YT=RR Treasury yields dip
FOREX: The dollar index .DXY little changed
RATE FUTURES: Fed funds for December FFZ6 unchanged; CME Fed Watch shows probability of December rate hike 95 pct
(Americas Economics and Markets Desk; +1-646 223-6300)