Strong hiring across the U.S. economy in November lent fresh support Friday to the Federal Reserve embarking on a long-awaited series of interest rate hikes later this month.
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The US economy added 211,000 jobs in November, according to figures released on Friday by the Department of Labor. The government said 298,000 new jobs were created in October instead of 271,000.
Federal funds futures contracts imply a 79-percent chance that the Fed will end seven years of near-zero interest rates at its December meeting and about even odds of a second rate rise by March. This is why the solid jobs report should dispel any doubts about December hike, experts believe.
Although Yellen indicated in a speech on Wednesday before the Economic Club of Washington that USA inflation remains well-below the Fed’s targeted goal, she emphasized that the Fed has seen considerable improvement in the economy and labor market.
The closely watched employment report came a day after Fed Chair Janet Yellen struck an upbeat note on the economy when she testified before lawmakers, describing how it had largely met the criteria the US central bank has set for the Fed’s first rate hike since June 2006.
As far as the latest jobs data is concerned, the last significant economic measurement prior to the Fed’s December 15-16 police meeting meets the targets detailed by the Fed as prerequisites for a rate hike, economists said. They see only a gradual pace of monetary policy tightening through 2016. U.S. Treasury debt yields initially rose, but later fell after OPEC failed to agree to an oil production ceiling.
Steady job gains this year and low mortgage rates have also boosted home sales, though sales have leveled off in recent months.
Earlier this week, the Institute for Supply Management reported that its index of manufacturing activity had fallen to 48.6 in November, with a figure below 50 indicating contraction.
Still, a strong US dollar is weighing on USA exports and cutting factory output, while lowering profits for US multinational corporations. The labor force is made up of the employed and the unemployed.
“Payroll gains were despite continued weakness in manufacturing and energy sectors, suggesting little spillover into the rest of the economy”, said Samuel Coffin, an economist at UBS in Stamford, Connecticut.
Wage growth slowed for the month of October, but average hourly earnings increased by four cents. That lowered the year-on-year reading to 2.3 percent from 2.5 percent in October. The average workweek per all US employees remained unchanged at 34.5 hours.
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.
But a broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they can not find full-time employment rose one-tenth of a percentage point to 9.9 percent. These workers are included in an alternate measure of unemployment known as the U6, which increased to 9.9% from 9.8%.
Sectors which did not fare well in November, were manufacturing, which shed 1,000 posts, and mining, which lost 11,000 positions. The last two months’ jobs numbers were revised higher.
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Separately, falling oil prices have cut factory output as drilling companies have ordered less steel pipe and other materials, such as fracking sand.
