Newspaper article International New York Times

Job Creation in U.S. Soars, Lifting Chance of a Rate Rise

Newspaper article International New York Times

Job Creation in U.S. Soars, Lifting Chance of a Rate Rise

Article excerpt

The unexpectedly strong jobs figures will add to expectations that the Fed will raise its benchmark interest rate next month.

The American economy added 271,000 jobs in October, a very strong showing that makes an interest-rate increase by the Federal Reserve much more likely when policy makers meet next month.

The report on hiring and unemployment, released on Friday by the Labor Department, was eagerly anticipated on Wall Street, where traders and economists have been sifting each new bit of economic data for any augury of the central bank's course.

The unemployment rate dipped to 5 percent, from 5.1 percent in September. Average hourly earnings also bounced back, rising 0.4 percent in October after showing no increase in September and lifting the 12-month increase to 2.5 percent.

The combination of the surge in job creation, rising wages and the falling unemployment rate increases the pressure on the Fed to finally move on rates after months of debate and uncertainty amid economic turmoil overseas.

At 5 percent, the unemployment rate is very close to what the Fed and many private economists would normally consider the threshold for full employment.

However, the so-called slack that built up in the labor market after the recession has altered traditional calculations of how far unemployment can fall before the job market tightens and the risk of inflation rises.

The proportion of Americans who are in the labor force, which fell to a 38-year low of 62.4 percent for September, was unchanged last month.

This week, Janet L. Yellen, the chairwoman of the Fed, told a panel on Capitol Hill that an increase in December was a "live possibility" if the economy continued to perform well.

Still, Ms. Yellen left herself and the rest of the Open Market Committee of the Fed plenty of wiggle room, emphasizing that no decision had been made on whether to raise rates for the first time in nearly a decade.

Fed officials will have an additional jobs report for November in hand by the time they gather for their final meeting of the year, on Dec. 15 and 16.

An initial interest rate increase would be small, most likely a quarter of a percentage point. …

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