Get Ready for an Interest-Rate Hike

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.

The Labor Department revised up previous two months’ job gains, with the employment gains in September and October combined 35,000 more than previously reported.

Economists expected the United States economy to add 200,000 jobs in November and the unemployment rate to remain unchanged at 5%, a seven-and-a-half-year low.

Last month saw job gains in construction (+46,000 jobs), retail (+31,000 jobs), professional and technical services (+28,000 jobs), and healthcare (+24,000 jobs).

There’s even less doubt now that the Federal Reserve will raise interest rates later this month. Even some of the hawks, who would typically worry more about inflation risks than weak economic growth, are weighing a possibility that they may face a long spell of sub-par growth and low inflation.

“November’s gain of 211,000 jobs, coupled with upward revisions to October and September, confirms the Fed’s view that the labor market remains robust and that wage growth could accelerate in 2016”, Levanon said. The median outlook was for four quarter-point hikes next year, while their views of the long-term normal level range from between 3 percent and 4 percent.

The jobs numbers are “certainly no reason for the Fed not to tighten on December 16”, said Jim O’Sullivan of High Frequency Economics. Wages have increased 2.3 percent from one year ago.

A rate hike later this month would also establish more certainty among investors and end speculation on the timing of the first rate hike, which has contributed to increasingly volatile stock markets. But construction spending in October hit its highest level since the Great Recession began in December 2007. These measures are down by 0.8 percentage point and 1.1m, respectively, over the year. Economists surveyed by CNNMoney predicted there would be 192,000 jobs added.

An hour into trading on Wall Street, spot gold was US$26 higher at US$1,087, silver climbed US$0.5 to US$14.5, while platinum added US$34 to US$879.

This month’s jobs report is very important for the Federal Reserve. “The job market still has a lot of steam and the Fed should be comfortable raising interest rates”. But factories shed 1,000 jobs. While other categories of Americans experienced improvements in their participation levels, the number of American men not in the workforce increased by 178,000 from October’s level of 37,973,000.