US employment points to steady growth
US employment points to steady growth
By Eoin Callan in Washington and Tony Tassell in London
Copyright The Financial Times Limited 2006
Published: December 8 2006 14:15 | Last updated: December 8 2006 14:15
US employers continued to add workers to their payrolls at a strong pace last month pointing to continued economic growth, the latest figures showed.
Businesses and government added 132,000 jobs to payrolls last month, beating market expectations and prompting investors to scale back their expectations of a rate cut next year.
The sharp rise will encourage the Federal Reserve to keep interest rates on hold when it meets next week.
The strong job creation provides further weight for Fed’s forecast that the US economy is retuning to a moderate rate of growth, despite a slowdown in key sectors such as construction and manufacturing.
Drew Matus, an economist at Lehman Brothers, said: “This is a very strong report well above what the Fed believes to be the break-even rate of job creation.”
The employment figures provided clear evidence that the US economic growth is being led by service sector, which added the bulk of jobs last month while payrolls were slashed by in construction by 30,000 and by 15,000 in manufacturing.
The overall rise in job creation means that when central bank governors meet next week they are likely to again cite the risks of rising inflation as the more pressing threat to the economy than a wider slowdown.
However, a slight rise in the unemployment rate to 4.5 per cent from a five-year low of 4.4 per cent will ease Fed fears about a tighter labour market fueling price rises.
The Fed has been consistently predicting a so-called soft landing for the economy, while currency and bond markets have tended to price in a harder downturn that would prompt the central bank to cut rates in the first half of next year.
US Treasuries on Friday weakened in reaction to the data as investors scaled back their expectations of a rate cut next year. The yield on the benchmark 10-year US note was trading 3.3 basis points higher at 4.526 per cent.
Action Economics said futures markets were pricing in a 36 per cent chance of a cut in the Fed funds rate in March, down from 50 per cent before the data. However, they are still pricing in a quarter-point easing by the end of June.
By Eoin Callan in Washington and Tony Tassell in London
Copyright The Financial Times Limited 2006
Published: December 8 2006 14:15 | Last updated: December 8 2006 14:15
US employers continued to add workers to their payrolls at a strong pace last month pointing to continued economic growth, the latest figures showed.
Businesses and government added 132,000 jobs to payrolls last month, beating market expectations and prompting investors to scale back their expectations of a rate cut next year.
The sharp rise will encourage the Federal Reserve to keep interest rates on hold when it meets next week.
The strong job creation provides further weight for Fed’s forecast that the US economy is retuning to a moderate rate of growth, despite a slowdown in key sectors such as construction and manufacturing.
Drew Matus, an economist at Lehman Brothers, said: “This is a very strong report well above what the Fed believes to be the break-even rate of job creation.”
The employment figures provided clear evidence that the US economic growth is being led by service sector, which added the bulk of jobs last month while payrolls were slashed by in construction by 30,000 and by 15,000 in manufacturing.
The overall rise in job creation means that when central bank governors meet next week they are likely to again cite the risks of rising inflation as the more pressing threat to the economy than a wider slowdown.
However, a slight rise in the unemployment rate to 4.5 per cent from a five-year low of 4.4 per cent will ease Fed fears about a tighter labour market fueling price rises.
The Fed has been consistently predicting a so-called soft landing for the economy, while currency and bond markets have tended to price in a harder downturn that would prompt the central bank to cut rates in the first half of next year.
US Treasuries on Friday weakened in reaction to the data as investors scaled back their expectations of a rate cut next year. The yield on the benchmark 10-year US note was trading 3.3 basis points higher at 4.526 per cent.
Action Economics said futures markets were pricing in a 36 per cent chance of a cut in the Fed funds rate in March, down from 50 per cent before the data. However, they are still pricing in a quarter-point easing by the end of June.
posted by Carlos T Mock @ 9:05 AM
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