The clear message from the labour market to the Fed is: “‘Just do it!'” said Harm Bandholz, chief USA economist at UniCredit Research in NY.
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Federal Reserve Chair Janet Yellen, speaking the day before a key employment report, said the USA economy needs to add fewer than 100,000 jobs a month to cover new entrants to the workforce, setting an implicit floor for the jobs growth policymakers want to see.
The number of people employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 319,000, to 6.1 millio, in November, after declines in September and October. Interest rate futures maturing in the second half of next year are rising slightly, showing traders are wagering the Fed will manage no more than two further hikes before the end of next year.
The Treasury market initially fell, then rebounded. “For the first time in memory, there were no meaningful downsides buried deep in the employment summary”. Manufacturers have suffered from a strong dollar and weak global economy that’s reduced demand for their exports. The upward revision leaves October the strongest single month of job creation this year.
The main thing that Fed officials have been pointing out has been the tightening in the labor market, so it’s obviously a very good thing. Although a 0.25-percentage point increase in mid-December would still leave the Fed’s short-term target rate in stimulative territory, the central bank might not have much leeway beyond that.
At 62.5 per cent, the labor force participation rate remains near its lowest level in nearly four decades, with a large number of people having simply given up looking for work.
Though wage growth likely slowed last month, economists say that would mostly be payback for October’s outsized gains, which were driven by a calendar quirk. Cheap oil has stunted business for energy producers, which have cut 124,000 jobs in 2015. Both said they expect the Fed to raise the rate in December.
It has been a better year for jobs, and a worse one for growth, than most economists had forecast. The company said it expected the slowdown in drilling activity to continue in 2016. Over the past three months, job gains have averaged 218,000 per month.
“Over the past 3 months, the economy has created an average of +218k jobs per months”.
Construction firms added 46,000 jobs, the most in two years.
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The market was prepared for the report: US stocks SPX, +1.25% surged, while yields on the 2-year Treasury edged higher.
