Fed divided on whether wage inflation is coming
If there is a surprise in the non-farm payrolls report, it might be on the wages side.
The Fed believes the US economy is at 'full employment', which is the level where most people who are looking have a job. It's the point when employers get a bit more desperate for workers and start bumping up wages to attract and retain talent.
For most of the Fed, now that the jobs market is relatively tight, it should happen soon. That's why the wage numbers in today's report matter almost as much as headline jobs growth. The three to watch are:
- Avg hourly earnings m/m: exp +0.2%
- Avg hourly earnings y/y: exp +2.5%
- Avg weekly hours: exp 34.6 hours
Be wary of a whipsaw in the US dollar if these numbers diverge from the jobs data. If they're high, however, do not buy the dollar against the yen because stocks might start to flip out on the chance of a hawkish Fed on March 16.
One of my favourite economists argues that Feb wages tend to be soft.
He also says NFPs tend to be weak in Feb and then revised higher. Soft jobs and wages would hurt the dollar, in particularly against the commodity bloc, and maybe the pound as well.
