The number of jobs added in November slowed to 155K which was well below the market expectations of 200K as well as the 3-month average from September to November, which is 170K. Meanwhile the unemployment rate remained at 3.7% for the third consecutive month with the labour force participation rate staying at 62.90% for the second consecutive month. Average hourly earnings rose at the same pace as in October by 0.2% m/m with y/y gains at 3.1%, the same rate as in October, a level not seen since the recession.

The latest labour market data somewhat suggests the pace of job creation is slowing, implying the economy could be coming off from the boiling point. Nonetheless, we believe the labour data will not discourage the Fed policymakers from raising their benchmark interest rates when they meet on December 18 and 19 by 25 basis points (bps) to 2.25%–2.50%.

However, we feel the latest data should act as a “warning flag” on some fronts. The Fed could become less aggressive in raising rates in 2019. We are pricing in for one or two rate hikes to stabilize around 2.75%–3.00%, below the normalization of 3.50%. Hence, global central banks could become less exciting in 2019, including Bank Negara Malaysia (BNM). We expect BNM to maintain the current 3.25% overnight policy rate (OPR) in 2019 in a move to support growth while ensuring inflation remains at a decent level.

• The job hiring pace slowed down in November, adding 155K jobs from 237K jobs in October, and well below the market expectations of 200K. The monthly average for September, October and November was 170K. Meanwhile the unemployment rate remained at 3.7% for the third consecutive month with the labour force participation rate staying at 62.9o% for the second consecutive month.

• Looking at the average hourly earnings, it rose at the same pace as in October by 0.2% m/m. On a year-on-year basis, the average hourly earnings rose 3.1%, the same rate as in October. Such a level has not been seen since the recession.

• The latest labour market data somewhat suggests the pace of job creation is slowing, implying the economy could be coming off from the boiling point. The economy posted strong growth in 2Q2018 and 3Q2018. Nonetheless, we believe the labour data will not discourage the Fed policymakers from raising their benchmark interest rates when they meet on December 18 and 19 by 25 basis points (bps) to 2.25%–2.50%.

• However, we feel the latest data should act as a “warning flag” on some fronts. The Fed could become less aggressive in raising rates in 2019. We are pricing in for one or two rate hikes to stabilize around 2.75%–3.00%, below the normalization of 3.50%. Hence, global central banks could become less exciting in 2019, including Bank Negara Malaysia (BNM). We expect BNM to maintain the current 3.25% overnight policy rate (OPR) in 2019 in a move to support growth while ensuring inflation remains at a decent level.

Source: AmInvest Research - 10 Dec 2018