After a two-month slowdown, job creation in the US has made a stunning resurgence. Nonfarm payrolls rose from 137,000 in September to 271,000 in October, far exceeding the 180,000 median value with the unemployment rate decreasing to 5.00%. It appears to be that the US employers hired at their swiftest pace in October since December of last year. Most of the job gains occurred in professional and business services (78,000), followed by health care (45,000), retail trade (44,000), food and drink services (42,000) and construction (31,000). Employment in the mining industry continued to shed jobs at a further decrease of -5,000 while the labor force participation rate remained continued to ebb near multi-decade lows of 62.40%. The average hourly earnings rose by 0.40%, or 9 cents to $25.20 compared to the previous month. The annualized gain in hourly wages was recorded at 2.50% percent over the 12-months ended in October, a value not seen in the U.S. for the past 6 years. When combining payroll creation and wage growth excluding participation rates, the Fed has the evidence it requires to normalize policy according to its own admissions.
So far, the move higher in the dollar is a strong reflection of the growing probability of liftoff at the next FOMC Meeting in December. The US dollar rose to a three-month high while the good news was viewed as largely negative by global stock benchmarks. A strong improvement in employment that matches the Federal Reserve’s long-term goal of targeting maximum employment will likely influence the Federal Reserve’s policy-making committee, improving the odds of a decision to give the green light in raising interest rates during the December 15th-16th meeting. The hint also provided by Federal Reserve Chair Janet Yellen in last Wednesday’s House testimony alluded to the fact that the Central Bank may move on a hawkish bias if underlying data confirmed economic strength. Financial market rate futures are currently pricing in a 70% probability of a rate hike in December, up from 58% before the employment numbers. While the dollar has since retreated from Friday’s highs, unless upcoming data marks a substantial reversal in economic fortunes, the stage is set for a further rally in the U.S. dollar.