US jobs report a green light for rate hike

A solid November job gain of 211,000 showed that despite weak growth overseas and struggling US factories, the USA economy appears healthy enough to withstand a Fed hike from record-low rates later this month. Labor officials also said that after revising data for October and September, they learned that 35,000 new jobs were left unreported.

The unemployment rate was unchanged at 5.0 percent, the lowest level in seven years and down from 5.8 percent a year ago, as the USA economy continues to fend off the drag from the slowdown in the global economy.

The Labor Department said Friday that employers added 211,000 jobs, led by big gains in construction and retail.

Job growth has averaged 218,000 the last three months – and for the 12 months ended November 30, the labor market has added an average of 237,000 net new positions.

For the Fed, conditions seem almost ideal for a period of small and only gradual rate increases in coming months.

Janet Yellen, Fed chair, this week signalled an interest-rate increase was looking increasingly likely this month as she declared the U.S. economy has “recovered substantially” from the recession and that the central bank had gone a long way towards meeting its goals of maximum employment and price stability.

Now, many experts agree that only something economically disastrous could alter the Fed’s course to raise rates this year.

The jobs report was released just a day after Ms. Yellen told federal regulators that the USA economy finally met the criteria the Fed wanted for an interest rate rise.

The agency says, “The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.1 million in November and has shown little movement since June”.

In somewhat of a disappoint sign, wage growth for USA workers moderated after a strong gain in October.

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

Average wages rose 2.3 percent over the past year. The Nasdaq composite increased 104.74 points, or 2.1 percent, to 5,142.27. “While this report can help justify a rate hike in December, it can’t justify anything more than a very gradual path of rate hikes”, said Brian Jacobsen, chief portfolio strategist for Wells Fargo Funds Management. Fed policy makers next meet on December 15-16.

It’s also worth keeping in mind that with the labor market tightening, many economists expect monthly job gains to slow soon.