This morning’s jobs report removes some of the lingering doubts about the U.S. economic outlook. By doing so, this report has effectively cleared the way for the Fed to start raising interest rates at next month’s meeting.There is all-around positive news in this morning’s October jobs report from the U.S. government’s Bureau of Labor Statistics (BLS). Not only did the ‘headline’ jobs number come way ahead of estimates (271K vs. estimates of 185K), but the report’s internals in terms of wages and hours is also painting a favorable-looking picture.
The unemployment rate ticked down to 5% from 5.1% the month before and appears headed towards carrying a 4-handle next month. Most importantly, the numbers from the last two weak jobs reports that started angst about the economy and the labor market were partly revised higher this morning, indicating that the labor market wasn’t really losing as much steam as those reports had showed.
It goes without saying that this report has direct Fed implications – the central bank been all but saying in recent days that they planned to go for lift-off in the mid-December meeting as long as the economy remained on track. Today’s report checks the box, and if we are able to do the same next month, then the December lift-off is effectively locked in. This Fed move, when it arrives, will have been the most anticipated action from the central bank. But it will nevertheless add to market volatility, as this morning’s immediate market reaction confirms.
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