Robust U.S. jobs report bolsters case for December rate hike
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth surged in October and the unemployment rate hit a 7-1/2-year low of 5.0 percent in a show of economic strength that makes it much more likely the Federal Reserve will raise interest rates in December.
Nonfarm payrolls increased 271,000 last month, the largest rise since December 2014, the Labor Department said on Friday. In addition, average hourly earnings rose a respectable 9 cents. The payrolls jump followed modest gains in August and September.
The unemployment rate now stands at its lowest level since April 2008 and is in a range many Fed officials see as consistent with full employment.
"The employment report had everything you could have asked for. It more than offsets the weakness in the prior two months and positions the Fed to hike rates in December," said Michelle Meyer, deputy U.S. chief economist at Bank of America Merrill Lynch in New York.
The reaction in financial markets was swift and sharp.
The dollar rallied to a near seven-month high against a basket of currencies as investors braced for higher borrowing costs. U.S. Treasury debt prices fell, with yields on the two-year note hitting a 5-1/2-year high. U.S. stocks ended mostly higher.
Rates futures implied a 70 percent chance of a Fed rate increase next month, up from 58 percent late on Thursday.
With speeches from several Fed officials, including Chair Janet Yellen, suggesting a low bar for a December rate increase, economists had said ahead of the report that monthly job gains above 150,000 in October and November would be sufficient grounds for the first increase in overnight borrowing costs since 2006. Continued...