Mon, Dec 08, 2014 - Page 15 News List

US jobs report paves way for Fed interest rate hikes

Reuters, WASHINGTON

US employers added the largest number of workers in nearly three years last month and wage gains picked up, a sign of economic strength that could draw the US Federal Reserve closer to raising interest rates.

Non-farm payrolls surged by 321,000, the most since January 2012, the US Department of Labor said on Friday. The unemployment rate held steady at a six-year low of 5.8 percent.

“This greenlights a Fed lift-off in mid-2015,” Comerica chief economist Robert Dye said.

Data for September and October were revised to show 44,000 more jobs created than previously reported, adding more sparkle to the report.

Last month’s job gains blew past Wall Street’s expectations for an increase of only 230,000.

It marked the 10th straight month that job growth has exceeded 200,000, the longest stretch since 1994 and further confirmation the economy is weathering slowdowns in China and the euro zone, as well as a recession in Japan.

A separate report from the US Department of Commerce showed exports increased 1.2 percent in October, helping to slightly narrow the trade deficit.

Exports to the EU, China and Japan all increased.

The economy added 2.65 million jobs over the last 11 months, surpassing the 2.33 million created last year.

“The economy is literally blasting off. It’s heading in the right direction and the outlook is a solid one,” MUFG Union Bank chief financial economist Chris Rupkey said.

The data buoyed US stocks and helped lift the US dollar to a five-and-a-half-year high against a basket of currencies as traders brought forward bets on the timing of the first rate hike.

The yield on the two-year Treasury note hit a three-and-a-half-year high.

The employment report provided the latest sign that a strengthening jobs market is starting to spur faster wage growth, a key factor to help determine when the US central bank starts lifting borrowing costs.

Average hourly earnings rose by US$0.09 last month, the largest increase seen since June last year.

Nevertheless, the gain left them up just 2.1 percent from a year ago — in the same tepid range they have held for the past few years and well below the 3 percent or more economists say the Fed wants to see before lifting benchmark borrowing costs.

The Fed has held overnight rates near zero since December 2008 and has pledged to keep them low for a “considerable time.” Many economists said policymakers could back off that pledge as soon as their next meeting on Tuesday and Wednesday next week.

“The November wage increase is a warning that labor market conditions are already starting to turn,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

“I suspect the Fed will be talking about a tightening labor market at its next meeting,” he added.

Details of the report were upbeat, even though a smaller and more volatile survey of households showed mild job gains after robust increases in prior months.

Most of the measures Fed Chair Janet Yellen tracks to gauge the amount of slack in the labor market showed improvement.

A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell to a fresh six-year low of 11.4 percent from 11.5 percent in October.

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