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NFP Supports Fed’s Call for Higher Interest Rates

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NFP Supports Fed’s Call for Higher Interest Rates

Wage growth and job creation have been strong indicators that the Federal Reserve has to do more to bring inflation under control. The market was undoubtedly shaken up by this. However, market players will remain skeptical regarding how long the robust performance can hold due to persistent recessionary risks.

Even with a 23,000 downward revision to the preceding two months’ figures, the US economy added 263,000 jobs in November, far exceeding the 200,000 consensus expectation. The leisure and hospitality sectors added 88,000 jobs, while the education and health sectors added 82,000.

The construction industry saw an increase of 20,000, while the manufacturing sector saw an increase of 14,000. Retail and wholesale trade both had declines (-49,000), though (-30,000).

Worker morale was bolstered further by larger-than-anticipated monthly wage rises of 0.6%, bringing the annual rate of wage growth to 5.1%. Despite a second straight reduction in the number of persons who said they were employed (this time by 138,000), the unemployment rate stayed unchanged at 3.7%, according to a survey of households. 

The unemployment rate remained unchanged because fewer people are choosing to participate in the labor force. Officials at the Fed will be hoping that today’s statistics will be the jolt needed to encourage market players to finally believe the Fed’s intent, given the repeated warnings that rates are likely to stay higher for longer to guarantee inflation is defeated.

Compiled by Coinbold