US jobs report raises expectations of rate rise
US jobs report raises expectations of rate rise
Expectations of a rise in US interest rates in December have soared following a stronger than expected jobs report.
The US economy added 271,000 jobs in October - far exceeding the 185,000 jobs that economists had forecast.
That strong number has raised expectations that the US Federal Reserve will raise interest rates at its policy meeting in December.
The Fed cut rates to near-zero in December 2008 in response to the gathering financial crisis.
The recovery since then has been slow, but October's jobs report could help persuade policy makers that the time has come for the first rise in interest rates since June 2006.
The report, from the Bureau of Labor Statistics, showed the jobless rate fell to 5% - the lowest rate in seven-and-a-half years.
In addition, there was positive news on previous months, with the number of jobs created in August and September raised by a net 12,000.
'Astounding number'
Job creation was strongest in professional and business services, health care, retailing, restaurants and bars, and construction.
There was also a strong rise in wages last month. Average hourly earnings rose nine cents to $25.20, which is a 2.5% rise on a year earlier.
"That was an astounding number. The uptick in the manufacturing workweek was also encouraging. It's pretty clear that the Fed would be justified in hiking in December, if the economy doesn't hit another air pocket," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds.
Earlier this week, Janet Yellen, chair of the US Federal Reserve, told a Congressional committee that a rise in US interest rates in December was "a live possibility".
APAnalysis: Andrew Walker, economics correspondent, BBC News
An increase of more than a quarter of a million in the number of people with jobs: it is undoubtedly a strong monthly figure. In the financial markets it is seen as increasing the chances of a Fed rate rise in December.
The headline figure unemployment rate of 5.0% is also pretty impressive. But there are persistent weaknesses, captured by the percentage of the population over 16 years of age who are in employment. It is now 53.9%. Before the financial crisis it was more than 63%. To find an earlier figure as low as today's you have to go back to 1984.
Some of the weakness reflects an ageing population, but it's not the whole story. There are still many Americans working fewer hours than they want and others not counted as unemployed in the data, because they are not currently looking for work - but would do if they thought they had a better chance of success.
Multiple moves?
Some economists think that a rise in December might be the start of a series of rate rises.
"It's almost a sure thing that the Fed will tighten in December. Based on their communication, they might move every other meeting," said Mike Bazdarich, an economist at Western Asset Management.
After opening higher, the major US stock market indexes fell.
The US dollar jumped following the report, adding one-and-a-half euro cents to €0.9311. Against the pound it strengthened by more than a cent to $1.5047.
"Mark your calendar for 16 December - markets are aggressively pricing in the first Federal Reserve rate hike for next month," said Christopher Vecchio, currency analyst at DailyFX.
"The US dollar is soaring across the board this morning after the October jobs figure blew past expectations, reaffirming the belief that the US economy is approaching the event horizon of the end of ZIRP (zero interest rate policy)."
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