The US labour market report for July was solid and broadly in line with our expectation, with 215,000 new jobs added to employment in July. Net revisions to the two previous months were positive at 14,000, which implied the overall change in nonfarm payrolls was 229,000 in July including the net revisions.
The three-month average monthly job growth is now up at 235,000, which in our view is a pace that will move the core of the FOMC in favour of a rate hike in September. Earlier this week, the dovish Fed member Lockhart said that it would take a significant deterioration in the data to convince him not to move in September and we believe his view represents the view among core members of the FOMC.
Average hourly earnings increased 0.2% m/m after disappointing in June where they were unchanged from May. The increase in July implied the yearly wage growth was lifted slightly to 2.1% from 2.0% in June. The monthly increase in average hourly earnings is important for our call for a Fed hike after the headline Employment Cost Index disappointed in Q2.
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