Traders see December Federal Reserve rate rise, few hikes in 2016
The total nonfarm payroll employment increased by 211,000 in November, and the unemployment rate remained at 5 percent, the lowest level since April 2008, data from the Labor Department showed Friday.
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.
“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, a portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin. Hospitals added 13,000 jobs in November.
Construction payrolls increased 46,000 last month, the largest gain since January 2014. And she has cited the labor market’s cumulative progress in recent years, with the unemployment rate down to 5% from 10% in 2009, and employers adding an average of more than 200,000 jobs a month in 2015. The BLS also says that the average hourly pay for production and nonsupervisory employees changed little, reporting a rate of $21.19. Early trading in the bond market shows traders think a rate hike is coming: The yield on the two-year Treasury rose to almost 1% – a level it hasn’t reached in roughly five years.
Friday’s jobs report also highlighted Brainard’s argument that weakness in the global economy could constrain US growth more than policymakers now anticipate.
Nationally, employers have now added an average 213,000 jobs a month over the past six months.
There were job gains in construction, health care and professional services. But with such a strong all-around report, it’s unlikely even the Fed’s most cautious doves will be able to convincingly argue for continued near-zero rates.
In its monthly National Employment Report, ADP said the US gained 217,000 private sector jobs in November. The addition of 211,000 jobs likely paves the way for a rate hike later this month.
“We believe the hurdle for dissuading the Fed from action at this time is extremely high”, said Michelle Girard, chief economist at RBS in Stamford, Connecticut. November job gains occurred in general merchandise stores (+12,000) and motor vehicle and parts dealers (+9,000). All it took was Federal Reserve Chair at a speech in Washington, D.C., where she talked up the economic risks of waiting too long to raise interest rates.
“To simply provide jobs for those who are newly entering the labour force probably requires under 100,000 jobs per month”, with anything above that helping “absorb” those who are unemployed, discouraged or had dropped out of the labour market, Ms. Yellen, who was speaking before Congress’ Joint Economic Committee, said in a question and answer session.