With the release Friday of a solid November jobs report underscoring improvement in the USA labor market, the stage appears set for the Federal Reserve Board to raise interest rates this month.
Advertisement
Federal Reserve Chair Janet Yellen, speaking the day before a key employment report, said the us 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. Hiring was revised higher in October and September by a combined 35,000 jobs. The dollar has jumped 13 percent in value in the a year ago, thereby making USA goods costlier overseas and imports cheaper in the United States. Labor market strength is an important consideration for the U.S. central bank over whether to move interest rates.
And job gains were broad-based across the economy in November. U.S. Treasury debt yields initially rose, but later fell after OPEC failed to agree to an oil production ceiling.
Job growth has averaged 218,000 the last three months – and for the 12 months ended November 30, the labor market has added an average of 237,000 net new positions. A hike would start to normalize monetary policy, closing the curtain on years of nontraditional measures, including the country’s first foray into quantitative easing. Nonetheless, the structural headwinds facing the US economy highlight the additional need for a policy response that extends far beyond central banks and must include governments and legislatures. That is below October’s annual increase, which had been the strongest in six years.
For the Fed, conditions seem almost ideal for a period of small and only gradual rate increases in coming months.
“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.
There was a 4-cent increase in average hourly earnings last month, bringing the figure to $25.25. The average workweek per all US employees remained unchanged at 34.5 hours. Family responsibilities keep others out of the labor force.
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.
The economy expanded at a modest 2.1 percent annual rate in the July-September quarter. That reflected an increase in part-time workers.
This morning’s jobs report from the Bureau of Labor Statistics showed that the economy added 211,000 jobs in November-a decent amount, but lower than October’s more solid report, which was revised substantially upward.
According to Jim O’Sullivan, chief U.S. economist at High Frequency Economics, recent jobless claims data shows no signs of labor market weakening.
Advertisement
Separately, falling oil prices have cut factory output as drilling companies have ordered less steel pipe and other materials, such as fracking sand. At 7,000, a majority of the job losses were in support services for mining. Sadly, the positive November employment report is likely to fuel further policy complacency in Congress.
