What ‘yuge’ job gains mean for mortgage rates

The gap had been 0.74 percentage point on October 27, the first day of the Fed’s last meeting, when policymakers said that they would assess the potential for higher interest rates at their “next meeting” December 15-16. JPMorgan Chase rose $1.83, or 3 percent, to $68.28, Bank of America rose 58 cents, or 3.4 percent, to $17.89 and Morgan Stanley rose $1.12, or 3.3 percent, $35.01.

Average hourly wage gains jumped by nine cents in October up to $25.20 and have increased by 2.5 percent year-over-year. It appears that attention at the Fed is increasingly turning to the pace of rate increases.

The Reserve Bank of Australia issues a statement on monetary policy Friday, while Malaysia reports on trade. “Job gains surged past analysts’ expectations, while the unemployment rate dropped even as 300,000 workers joined the labor force”.

So now, with the jobless rate back at a healthy 5 percent, most economists say the Fed needs to return the country to a more traditional borrowing environment.

This is certainly a risk given that growth in the emerging world continues to slow, that pockets of financial excesses there have yet to be sufficiently addressed and that broker-dealers continue to seek to reduce their exposure to risk, lowering market liquidity.

A hike in short-term interest rates would be positive for savers who have been missing out on interest on their deposits.

After the release of the employment data, economists lined up to predict that a rate increase is now almost a lock at the Fed’s mid-December meeting.

“This might encourage people to add another side dish at Thanksgiving and possibly upgrade to oyster stuffing”, he said.

Payroll reports for October and November are deemed critical to the Fed’s decision, especially after job gains fell recently from their monthly average of 200,00-plus for most of 2015.

ENERGY: In energy markets, USA crude oil fell 78 cents to $44.41 a barrel in electronic trading in New York.

Job gains were strongest in retail sales, health care, and restaurants, signs that American consumers are spending more.

Economists expect the October payrolls report Friday to show an increase in the number of workers employed from September, with Fed officials from Yellen to Fed Bank of Atlanta chief Dennis Lockhart underlining this week that the central bank is still data dependent. During August and September, US hiring had flagged amid financial turmoil in China and faltering growth in Europe and emerging markets. The economy grew at just a 1.5 percent annual rate in the July-September quarter.

That figure has fallen in recent years as the aging population and increasing retirements by baby boomers have slowed the growth of the US workforce.

The gap between yields on Treasuries maturing in two and five years widened to 0.84 percentage point, the highest since August 18, as speculation begins to build for a second Fed rate increase.

Oil prices fell as much as 2 percent on Friday, posting their third weekly decline in four, on pressure from a rallying dollar and higher interest rate expectations after strong U.S.jobs growth in October. Overall, services firms expanded last month at the fastest pace in three months.