U.S. jobs boost may lead to interest rate rise

The U.S. added 211,000 jobs in November, beating expectations and erasing any lingering doubt about whether the Federal Reserve will raise interest rates for the first time in nine years at its mid-December meeting.

Analysts say that the surge in employment reported for November is a clear sign that the US economy bounced back, which would make a federal rate hike later this month very probable, as Fed Chair Janet Yellen had recently promised.

Among decreases in November, the information sector lost 12,000 jobs and mining employment declined by 11,000.

Construction led the way with 46,000 jobs added, after adding 34,000 positions in October and 19,000 in September.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose to 62.5 percent from a near 38-year low of 62.4 percent. It’s still below the roughly 3.5 percent annual gain consistent of a strong economy.

She also said the USA economy was ripe for a long-awaited hike in the Fed’s benchmark interest rate. Still, with the Fed on the cusp of raising rates, the outlook for inflation is low.

“A significant number of individuals now classified as out of the labor force would find and accept jobs in an even stronger labor market”, she said.

The tough news, however, is that the number of individuals accepting lower-paying work (part-time jobs, for instance) because of lack of availability of higher-paying work (full-time jobs with benefits) increased by 319,000.

Oil field services provider Schlumberger this week announced another round of job cuts in addition to 20,000 layoffs already reported this year. Concerns over a possible increase in the interest rates in the U.S. were overshadowed by enthusiasm among investors over comments by European Central Bank President Mario Draghi, who said that the ECB was open to further “stimulus measures” after the bank eased monetary policy less than investors wanted on Thursday.

“The November jobs report showed another strong month of job gains, along with upward revisions to prior months”, said National Association of Federal Credit Unions Chief Economist Curt Long.

There was a 4-cent increase in average hourly earnings last month, bringing the figure to $25.25.

“It was encouraging that job growth has become more broad-based”, said Ryan Sweet, director of real time economics at Moody’s Analytics. “It also eliminates any fears of downside risk to growth, but provides no evidence of a significant upshift beyond the 2.2 percent average since the recovery began”.

Wall Street’s top banks said in a Reuters poll on Friday that they expect the central bank to maintain a slow pace of rate hikes, with the median forecast for the fed funds rate for mid-2016 about 0.75 percent and 1.125 percent for the end of the year.