Strong job data in US paves way for Fed’s rate hike

US non-farm payrolls rise by 211,000 in November, giving 'go' sign to US Federal Reserve interest rate hike for first time since 2006

Photo by: Reuters
Photo by: Reuters

US employment increased at a healthy pace in November, in another sign of the economy's resilience, and will most likely be followed by the first Federal Reserve interest rate rise in a decade later this month.

Nonfarm payrolls rose 211,000 last month, the US Labor Department said on Friday. September and October data was revised to show 35,000 more jobs than previously reported.

The unemployment rate held at a 7-1/2-year low of 5.0 percent, as people returned to the labor force in a sign of confidence in the jobs market. The jobless rate is in a range many Fed officials see as consistent with full employment and has dropped seven-tenths of a percentage point this year.

"The employment report should remove the final doubts about a rate hike at the December meeting. The clear message from the labor market to the Fed is: 'Just do it!'" said Harm Bandholz, chief US economist at UniCredit Research in New York.

The closely watched employment report came a day after Fed Chair Janet Yellen struck an upbeat note on the economy when she testified before lawmakers, describing how it had largely met the criteria the US central bank has set for the Fed's first rate hike since June 2006.

Yellen said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working age population.

A Reuters survey of banks that deal directly with the Fed showed all but one of the so-called primary dealers expect the Fed will hike rates at the December 15-16 meeting. They see only a gradual pace of monetary policy tightening through 2016.

The US dollar firmed against the euro after European Central Bank President Mario Draghi said in New York that the ECB could deploy more stimulus if needed. US Treasury debt yields initially rose, but later fell after OPEC failed to agree an oil production ceiling. US stocks ended higher.

Though wage increases slowed last month, economists say that was mostly payback for October's outsized gains, which were driven by a calendar quirk. Anecdotal evidence, as well as data on labor-related costs, suggest that tightening job market conditions are starting to put upward pressure on wages.