Economics

Employment report seals December rate rise in the US

The Fed looks poised to raise interest rates as the US approaches full employment.

02/12/2016

Keith Wade

Keith Wade

Chief Economist & Strategist

Today’s US jobs report showed payrolls rose 178,000 in November, in line with expectations. Alongside a surprise drop in the unemployment rate to 4.6%, this gives the US Federal Reserve (Fed) the case to raise rates.

On the less positive side, we saw a drop in average hourly earnings on the month which took the year-on-year rate of pay growth on this measure to 2.5% from 2.8% and just over half the drop in unemployment was due to a lower participation rate.

However, while this may be seen as a sign of weakness, the unemployment rate is now at its lowest level since 2007 and surveys point to skills shortages and higher compensation. The Fed is likely to recognise that the economy is approaching full employment and should add another 25 basis points to the Fed funds target on 14 December.