2017 Economic Calendar
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Market Reflections  

October 6, 2017
Average hourly earnings are a warning signal of wage inflation, jumping 0.5 percent in September that matches a 0.5 percent upward revision for July as the expansion high. The year-on-year is up 2 tenths to 2.9 percent to also match the expansion high. The sudden appearance of pressure, against a labor market where the unemployment rate is down 2 tenths to a 16-1/2 year low of 4.2 percent, points to lack of slack in the labor market and risk of accelerating wage pressure ahead. A footnote to the September employment report is a 33,000 hurricane-related dip in nonfarm payrolls reflecting a 104,700 drop at restaurants.

The appearance of wage inflation will make all the members of the FOMC uncomfortable and significantly raise the chances for a rate hike, certainly by the December meeting and perhaps as soon as the coming one at month end. Short-term rates did move higher but only to a limited degree, rising 3 basis points on the day to 1.53 percent. Increased risk of Fed action didn't help stocks which, after a very strong week, ended slightly lower. Still the Dow, at 22,773, finished the week with a very strong 1.6 percent gain. The dollar ended the week at 93.81 for a 0.8 percent gain. Oil, falling on the week to $49.32, is showing no reaction to what looks like a pending Gulf hit by Tropical Storm Nate which may increase into a hurricane by landfall.

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