US DATA
Nonfarm productivity data were as expected in the final Q3 release but ULCs saw some notably dovish revisions. Fed Chair Powell and some FOMC members have said for multiple months now that they don’t expect the labour market to be a source of elevated inflationary pressures in the near-term (Powell phrased it as “anytime soon” back in his August Jackson Hole appearance) and this release should further reinforce that view.
- Nonfarm labor productivity was unrevised in the final Q3 release at 2.2% annualized for a similar pace to the 2.1% seen in Q2. It left productivity growth of 2.0% Y/Y.
- The broader revisions were on the dovish side though as hourly compensation was revised down from 4.2% to 3.1% annualized in Q3, driven by softer manufacturing pay.
- That in turn led to softer than expected ULC growth of 0.8% annualized vs consensus of 1.3% and the initial Q3 estimate of 1.9%.
- The ULC data were all the more notable because Q2 was revised down from +2.4% to a much weaker -1.1% annualized.
- The data can be volatile when looking at any given quarter, but the level of the ULC index in Q3 is now 1.1% lower than previously estimated and the Y/Y for ULC growth is 2.2% Y/Y rather than 3.4% Y/Y.
- The softer wage growth profile behind these ULCs should help smooth any concerns about the recent acceleration in average hourly earnings data (standing at 4.5% annualized in the three months to Nov vs a recent low of 2.8% annualized back in April).
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