America nails it on jobs

Us american women's gymnasticsGetty Images / Doug Pensinger / AllsportKerri Strug of the USA waves to the crowd from the winners podium after injuring her ankle during her routine at the Georgia Dome in the 1996 Olympic Games in Atlanta, Georgia.

On Friday morning, the November jobs report paved the way for the Federal Reserve to raise its benchmark interest rate in two weeks.

The Bureau of Labour Statistics reported that the US economy added 211,000 jobs in November, while the unemployment rate held steady at a seven-year low of 5%.

Economists had estimated that nonfarm payrolls grew by 200,000 jobs last month, while the unemployment rate was unchanged at 5%.

Average hourly earnings grew 0.2% month-on-month, unchanged from October. Compared to the same month last year, earnings growth was also unchanged, at 2.3%.

And the labour-force-participation rate was little changed from the prior month, at 62.5%.

This report was the last big data point ahead of the Fed’s two-day policy meeting in two weeks. Economists had expected that a report that was just good enough would cement the Fed’s conviction to hike rates for the first time in nine years.

“Instead of wasting time focusing on abstract concepts such as equilibrium interest rates and NAIRU [or the nonaccelerating inflation rate of unemployment], perhaps the Fed should just see what is happening in front of its face,” wrote Renaissance Macro’s Neil Dutta in a client note. “The message from November’s jobs is clear, the US labour market is unambiguously strengthening.”

In remarks earlier this week, Fed chair Janet Yellen said the labour market’s progress was healthy enough to boost confidence that the Fed may reach its 2% inflation target soon.

Gains in construction, healthcare, and professional and technical services boosted growth in November, as mining and information jobs were trimmed.

And the October print of jobs growth was revised up to 298,000 from 271,000, making it the best month for American jobs growth this year.

All this, then, would intensify the debate, and forecasts, about the pace of interest-rate hikes, as the Fed likely proceeds to continue easing monetary policy.

In a client note, BNP Paribas economists wrote, “the Fed’s recent rhetoric suggests that a December rate hike is a done deal while we are looking at a possible bump in the road next year that would force the Fed to pause its every-other meeting rate hike schedule.”

Via Bloomberg, here’s what Wall Street had expected:

  • Nonfarm payrolls:+200,000
  • Unemployment rate: 5%
  • Average hourly earnings month-on-month: 0.2%
  • Average hourly earnings year-on-year: 2.3%
  • Average weekly hours worked: 34.5

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