Jobs Report Makes a March Fed Rate Hike Nearly a Done Deal
Although the payrolls figure was less than expected, an unemployment rate below 4% suggests many policy makers will likely see the U.S. economy near maximum employment.
The December jobs report was another step toward maximum employment.
Photographer: Frederic J. Brown/AFP/Getty Images
Only a few hurdles remain before it’s safe for bond traders to assume that the Federal Reserve will start raising interest rates in March. The U.S. economy just cleared a big one with the latest report on the labor market.
Yes, the top-line payrolls figure failed to live up to lofty expectations, with U.S. employers adding just 199,000 workers in December, compared with the median estimate of a 450,000 gain in a Bloomberg survey of economists. But that looks like a reflection of harsh seasonal adjustments from the Bureau of Labor Statistics — the rest of the jobs report was unambiguously strong. As it did in the November report, the household survey told a much more optimistic story about the labor market, with the unemployment rate tumbling to 3.9%, beating projections for a dip to 4.1% and another big step toward the 3.5% level that Fed officials see prevailing from the end of the year through 2024. Average hourly earnings jumped 4.7% from a year ago and 0.6% from November, both handily outpacing the median forecast.