FED under pressure on rates.

The US economy added more jobs than expected in November, a sign that demand for new workers remains strong despite the Federal Reserve’s efforts to cool the economy. Non-farm payrolls rose by 263,000 last month, compared with an expected 200,000. Despite these gains, the unemployment rate remained steady at 3.7 per cent. The US dollar index jumped 0.8 per cent on the release of the data because of expectations the figures would add to pressure on the Fed to keep raising interest rates.

The S&P 500 stock index fell 1 per cent, and US government bonds sold off sharply, sending yields higher. The two-year Treasury yield, which moves with interest rate expectations, rose 0.11 percentage points to 4.37 per cent at one end. The central bank is trying to dampen economic activity by rapidly raising borrowing costs to tame inflation, which is running at multi-decade highs. « The economy is growing.

Wages are rising faster than inflation. » The Fed has signalled that it will end its string of 0.75 percentage point rate increases and move to a half-point rise this month, even as it ultimately targets higher interest rates than expected next year. Many officials have indicated the benchmark policy rate could reach 5 per cent. Average hourly earnings last month increased another 0.6 per cent, higher than the previous period and a 5.1 per cent annual jump.

The economy has added 392,000 jobs each year, on average, compared with 562,000 monthly last year. However, last month the so-called labour force participation rate, which tracks the share of workers either employed or looking for a job, remained below pre-pandemic levels at 62.1 per cent.

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