US economy adds 199,000 jobs in November

Non-farm payrolls rise sharply while unemployment rate slides to 3.7%

US employers added 199,000 jobs in November, a rise from October and another sign of labour market strength that will bolster Federal Reserve officials’ view that interest rates need to remain high for some time yet.

The non-farm payrolls figure was stronger than expected and marks a jump from 150,000 the previous month. The US unemployment rate fell to 3.7 per cent from 3.9 per cent, the Bureau of Labor Statistics said on Friday.

While markets are betting the Federal Reserve will start cutting interest rates from their current target range of 5.25 per cent to 5.5 per cent before the middle of next year, central bank officials say cuts remain off the agenda.

A major reason is that the labour market has remained resilient despite the Fed having raised rates by 5.25 percentage points since early 2022 in an attempt to quell rampant inflation.

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Fed chair Jay Powell last week said labour market conditions “remain very strong” despite job openings slowing to a more “sustainable” level. Rate-setters want to see more signs that their restrictive monetary policies are finally beginning to dent wage growth to levels consistent with their goal of keeping inflation steady at 2 per cent.

The November labour market figures showed average hourly earnings rose 0.4 per cent month on month, and at an annual rate of 4 per cent.

Rate-setters on the Federal Open Market Committee convene in Washington next week, with a policy announcement due on Wednesday afternoon. Rates are forecast to stay on hold.

Stock futures dipped and Treasury bond yields rose following the jobs figures.

The two-year Treasury yield, which moves with interest rate expectations, rose to 4.73 per cent, its highest level in December, while the 10-year Treasury yield increased 0.11 percentage points to 4.24 per cent.

In the futures market, traders scaled back bets that the Fed would ease policy as soon as spring. Odds on a quarter-point interest rate cut in March fell, while a full cut is still priced in for May. – Copyright The Financial Times Limited 2023