US jobs: A likely story… - ING

James Knightley, Chief International Economist at ING offered his views on today's mixed US jobs report, which showed a surge in payrolls but with non-inflationary wage growth.

Key quotes:

Yesterday’s National Federation of Independent Business labour survey showed small businesses are increasingly struggling to find workers with a net 22% saying this is the greatest impediment to doing business (the largest single factor cited). As such, the competition to find new - and retain current - staff meant that the proportion of businesses raising pay was its largest since 2000 and the net proportion planning to raise pay is close to 19-year highs.

With JOLTS data showing that there is only one unemployed worker for every new job opening, it is also clearly a problem for larger corporations. As such, it is taking longer to fill vacancies. Consequently, we are a little sceptical of today’s jobs report and instead we think payrolls growth will slow and wage growth will quicken in coming months.

This is just one reason why we think headline consumer price inflation could hit 3% in the summer (others include dollar weakness, rising commodity prices, cell phone data plan quirks and medical care costs). As such, we look for four rate hikes this year, starting in March, with the Fed signalling a clear willingness to do so in updated forecasts.