The Wu Tang Clan may have been onto something when they eloquently lyricized that “cash rules everything around me.” Janet Yellen and her compatriots at the Federal Reserve certainly think so.
The Fed Chairwoman has consistently identified wage inflation as a key input into the committee’s monetary policy decisions, and October’s jobs report showed that average hourly earnings are moving in the right direction.
While sources have yet to confirm if Janet was bumping the ‘90s classic on Friday, she’s likely to have been quite pleased with the 2.8 percent increase in wages from a year earlier, the sharpest rise in seven years. In addition to pocketing more cash, workers are feeling more confident about pursuing greener pastures, with the percentage of people leaving their jobs voluntarily jumping to 12.1 percent. While the report also showed that the unemployment rate dropped to 4.9 percent from 5 percent, this was driven by a drop in the participation rate, which ticked down a touch to 62.8%.
Although last month’s total change in nonfarm payrolls was a slight miss and manufacturing took a small hit in October, losing 9,000 jobs, this was offset by the upward revision of 44,000 jobs for the August and September reports. Overall, the report was broadly positive and the Fed got what it needed to stay on track for a December rate hike.