US Non-Farm Payroll good enough to get even the doves cooing

6th March 2015 By: Ranko Berich

US Non-Farm Payrolls – 06/03/15

Today’s figures show yet another month of rising wages and high job creation in the turgid US labour market, making rate hikes more certain than ever.

Two years ago, one of the Fed’s most dovish members, Narayana Kocherlakota, identified 5.5% as the threshold unemployment level that would need to be crossed before the Fed hiked rates. In 2013, 5.5% was deemed nothing more than a distant wish and, although Kocherlakota is not currently a voting FOMC member, the fact that even the most dovish rate hike criteria has been reached illustrates just how far the labour market has come.

In recent hearings Yellen made it clear that once the Fed removed the word ‘patience’ from its forward guidance, all bets would be off and rates could rise at any subsequent FOMC meeting. With job creation soaring, wages rising consistently and unemployment falling, these figures place a big tick in the Fed’s checklist for January and we can now expect the Fed to change its guidance.

Market expectations for a June 2015 rate hike are now looking increasingly justified – all that’s left is for the economy to maintain this pace into Q2.