US employment increased strongly in November in a show of the economy’s resilience, which most likely paves the way for the Federal Reserve to raise interest rates this month for the first time in almost a decade.
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The jobs report is widely viewed as the most significant monthly benchmark of the US economy, and earlier this week Fed Chair Janet Yellen said she still wanted to see more data before making a decision about a potential rate hike at the central bank’s meeting this month. About 273,000 people joined the labor force last month, lifting the closely watched participation rate up a bit to 62.5 percent, though still a historically low level.
Construction employment rose by 46,000, while lower-paid sectors continued to predominate, including retail (30,700) and professional services (27,000).
Friday’s jobs report also highlighted Brainard’s argument that weakness in the global economy could constrain USA growth more than policymakers now anticipate. Concerns over a possible increase in the interest rates in the USA 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 PayScale Index, which tracks the change in wages for employed US workers, forecasts a 0.6 percent year-over-year increase in pay for Q4 2015.
The unemployment rate held at 5 percent, the lowest level during a slow but steady six-year economic recovery. There’s nothing in wage or inflation data to suggest that the economy is overheating, and there are signs that there is still plenty of slack in the labor market. More than 12 million were added during the economic recovery that followed, for a net gain of over 5 million jobs. It may have been her strongest comment yet pointing toward a rate increase at the Fed’s December 15 and 16 meeting. Factories shed 1,000 jobs. “A solid job gain of 211,000 following sizable upward revisions in the prior two months boosted the average job gain over the past three months to a respectable 218,000, the best showing since July”, said Doug Duncan, chief economist with Fannie Mae.
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Manufacturing has been crippled by a strong dollar, efforts by businesses to reduce bloated inventory and spending cuts by energy companies scaling back well drilling and exploration in response to sharply lower oil prices. The federal government reported Friday the economy added 271,000 jobs in October. Mining lost 11,000 positions. Michael Feroli at JP Morgan told clients the big takeaway from Yellen’s comments was that the conditions for a December rate hike were falling into place.
