Jobs Report Weak, but Fed Still on Path to Raise Rates in December
A weaker-than-expected U.S. nonfarm payrolls report set-off volatile reactions in several markets on Friday amid concerns the U.S. Federal Reserve may have to consider curtailing its plans to raise rates aggressively in 2019. The slow job growth suggests that economic growth may be losing steam, but not enough to sway Fed policy.
Economy Added Jobs
According to the U.S. Labor Department, Nonfarm Payrolls increased by 155,000 for November while the Unemployment Rate again held at 3.7 percent, its lowest level since 1969. Economists were looking for payroll growth of 198,000 and the jobless rate to remain changed.
Wages Rose Last Month
Average hourly earnings rose last month, but the increase didn’t raise fears about an overheating economy. Average hourly earnings rose at a 3.1 percent pace from a year ago. The monthly earnings gain of 0.2 percent fell short of estimates for a 0.3 percent increase. The average work week edged lower by 0.1 hours to 34.4 hours.
Other Details
The real unemployment rate rose from 7.4 percent to 7.6 percent. The unemployment rate for African-Americans fell 0.3 percent to 5.9 percent, tied for its lowest on record. Services-related industries added the most jobs, while goods producers added the fewest since March. Additionally, 6,000 government jobs were cut.
Revisions
The weak tone in the jobs report was reaffirmed by a downward revision in October’s count. It was initially reported at 250,000, but revised lower to 237,000. September’s total was revised up from 118,000 to 119,000.
Impact on Stock Market
Stock index futures initially turned positive following the release of the weak report as investors bet on a less-aggressive Federal Reserve.
Influence on Fed Monetary Policy
Although the headline number came in below the forecast, the economy did add more jobs in November. Furthermore, the unemployment rate remained near a record low. Most of all, average hourly earnings rose on a monthly basis albeit below the estimate, but it did move the annual rate higher. Therefore, we have to conclude that the Federal Open Market Committee (FOMC) has enough evidence to continue with its plan to raise its benchmark interest rate by 25 basis points at its December meeting.
This article was originally posted on FX Empire
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