Dollar firms after robust United States jobs report backs rate hike

The U.S. economy added 211,000 jobs in November and unemployment was 5.0%, remaining unchanged from the previous month, according to figures released this morning by the U.S. Bureau of Labor Statistics (BLS). The construction sector led the increase with 46,000 jobs added, along with a gain of 28,000 in professional services, 24,000 jobs added in the health-care sector and 31,000 jobs added in the retail sector.

Average hourly earnings rose 2.3 percent in November from a year earlier, down from 2.5 percent in October.

“The answer, if there is one, is in a set of policies from the government, not interest rate policies from the Federal Reserve”, Matus said.

Economy watchers have been zeroed in on the November employment report throughout the fall, anticipating it as the final go-ahead for the Federal Reserve to raise key interest rates from near-zero percent for the first time since 2006.

Fed chair Janet Yellen struck an upbeat tone about the prospect of a rise in remarks on Wednesday, which she said would show how far the economy had come since the downturn and that it was a day “we all are looking forward to”.

The economy’s strengths were evident in last month’s hiring patterns.

The healthy job figures indicate that consumer spending is helping the economy surmount some lingering challenges.

Friday’s report included upward revisions to that number: according to the Department of Labor, an additional 27,000 jobs were created in October and about 8,000 more jobs were created in September than originally believed.

The sizable gain in construction jobs last month, even as the Fed is preparing to raise rates, suggests that few expect higher borrowing costs to derail home building or sales. CEO Tiger Tyagarajan says Genpact has added about 400 people to its 4,000 person US workforce this year, many of them in highly skilled areas such as software programming and management consulting.

There were job gains in several year USA employment sectors in November, but the Labor Department reported the mining industry was hit hard with a loss of about 11,000 jobs last month. The pace of future rate increases will be contingent on progress toward the central bank’s inflation goal and probably depends on how quickly wage pressures mount as the job market tightens. She signaled that a rate increase is likely because the labor market has improved over time, with unemployment falling from 10% in 2009. Traders also see about even odds of a second rate hike by March. “Some who are counted as out of the labor force might be induced to seek work if the likelihood of finding a job rose or if the expected pay was higher”. Although a 0.25-percentage point increase in mid-December would still leave the Fed’s short-term target rate in stimulative territory, the central bank might not have much leeway beyond that.

Though unemployment at 5 per cent is at or near the level many policymakers consider to be full employment, Ms. Yellen said that high levels of discouraged workers, part-time employment and other job market measures show there is still room for progress.