US jobs growth fuels expectations of rate rise

Markets placed a bet on a July 2015 rate rise from the Federal Reserve after official figures showed the US economy creating jobs at its fastest rate in three years in November.

Non-farm payrolls surged by 321,000 during the month, the fastest pace of growth since January 2012, the Labor Department said.

“This supports the view that the Federal Reserve will start hiking rates in the middle of next year,” said Mohamed El-Erian, chief economic adviser at Allianz.

“There is no doubt that this is an impressive figure, and will give the hawks at the Fed a bit more fire in their bellies at the next FOMC [Federal Open Market Committee] meeting,” said Rob Carnell of ING bank.

Futures contracts show that traders believe there is a strong likelihood of the first rate hike coming in July, based on CME FedWatch, which tracks rate hike expectations.

The jobs growth figure, which was considerably higher than analysts’ expectations of a 230,000 increase, instantly boosted the value of the dollar against a basket of other currencies by 0.6 per cent.

The unemployment rate stayed level at 5.8 per cent. The participation rate also remained steady at 62.8 per cent.

Average earnings grew by 0.4 per cent on the month, the biggest increase since June 2013. Factory payrolls rose by their most in a year, while professional and business services took on the most workers since November 2010.