U.S. Employment Report – We are GO for liftoffContributors Dr. David Kelly, Global Markets Insights Strategy Team
The November Employment Report, while not a blockbuster, was very solid and should remove the last potential obstacle to a Federal Reserve (Fed) rate hike on 16 December.
- Total payrolls increased by 211,000, a little higher than consensus expectations of 190,000. Job gains for the prior two months were revised up by a combined 35,000.
- The unemployment rate stayed constant at 5.0%, as the labour force grew by a healthy 273,000. Even with the growth in the labour force, it is worth nothing that average monthly labour force growth over the last year has been 75,000, less than half the average monthly gain in household employment.
- Average hourly earnings for production and nonsupervisory workers rose by $0.01, an increase of only 2.0% year-over-year. Other measures of labour compensation including average hourly earnings of all employees and unit labour costs released earlier this week suggest some building pressure in labour cost.
- Other measures of market tightness were mixed in this report, with a decline in the number of discouraged workers and the long-term unemployed, but an increase in the number of people working part-time for economic reasons.
Nevertheless, Fed officials have made it abundantly clear in recent weeks that they only needed to see “some further” improvement in the labour market. Today’s report clearly satisfies this requirement. Because of that, we expect the Fed to begin to raise rates on December 16, and that further labour market improvement should lead to further short-term interest rate increases over the course of 2016.
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