If Jobs are so great.....

Bob Savage

The gradualism of the present FOMC wasn't moved by the lastest US employment report. For those looking at the report - revisions to jobs from August and July added 87,000 and made up for the slight miss in September jobs created at 134,000. Throw in the noise of the hurricanes, estimated by BLS at over 200,000 and you have the makings of a very strong US labor market. The unemployment level at 3.7% gets this across. Wages were as expected - still strong but not roaring to levels where the Fed will take notice - 3% isn't 5% - and that is the level where some of the inflation skeptics like NY Fed President Williams may care.

There are two other things about the report that most of the analysts aren't telling us - 1) The employment to population ratio remains below the pre-Great Recession Level - so we have labor capacity despite the 3.7% headline. 2) the correlation of money velocity and jobs isn't working and that is confirmation of the Phillips Curve problem. Jobs and leverage usually go together and spark inflation, just not yet. M2 velocity matters and highlights the still broken aspect of the banking system globally.