“An outstanding set of US labor market data despite delta concerns and hiring difficulties. New jobs are being created at a robust pace, working hours have increased, and the US unemployment rate has fallen significantly from 5.9% to 5.4%.
“Wage growth rose to + 4.0% YoY despite lower income job seekers who could skew wages downward, suggesting positive underlying wage increases. This is a positive backdrop for consumer spending and activity in the service sector.
“As the labor shortage recurs at other inputs, we can expect the current exceptional growth rate to be moderate, but not reserved for the foreseeable future. On the plus side, the labor force participation rate rose slightly in July and we should expect better labor supply dynamics after additional unemployment benefits were cut.
“Overall, the Federal Reserve should be pleased with the pace of the recovery in the labor market. Wages are rising and house prices are booming, making it increasingly difficult to justify the very loose monetary policy. The financial markets should prepare for more communication in a gradual throttling of bond purchases in the fourth quarter. “