Wells Fargo: NFP Pushes FOMC To Gray Zone

November’s NFP data showed an increase in payrolls of 210000, significantly below the 550000 expected. According to Wells Fargo’s analysts, this reading is clear evidence that nonfarm payrolls are below consensus expectations.

They add that a slower pace of wage growth may slightly ease some concerns about a wage price inflation spiral.

With just one final employment report left in the current year, nonfarm payrolls are unevenly four million jobs below their pre-Covid-19 level.

Job growth is still easily outpacing the slow pace that the U.S. labor market experienced during the recovery from the 2008-2009 financial crisis.

This morning’s NFP data has left he FOMC in a gray zone. Key Fed officials have been lately focusing on a faster pace of tapering, with a possible policy shift occurring as soon as the 15 December’s FOMC meeting, so a slower pace of wage growth may slightly ease some concerns about a wage-price inflation spiral.

The FOMC will clearly be discussing a faster taper at its next meeting, but this morning’s data does give the Fed an out if it would like to wait an extra six weeks until its following meeting in late January 2022.

The Omicron variants adds additional uncertainty to whether job growth can rebound to a more robust pace through the winter as health concerns flare up again. With still so little known about the severity of the new variant at this stage, we continue to expect hiring to remain solid.