Long before the Labor Department released November’s jobs numbers on Friday, which showed a 211,000 increase in employees, the Federal Reserve had been indicating a rate hike was imminent.
Now, it’s a virtual certainty.
Surpassing expectations for November’s jobs numbers, the Labor Department gave cover for Fed Chair Janet Yellen enough cover to increase rates during the December meeting, which is scheduled for Dec. 15-16. Yellen, during testimony and other public remarks throughout the past several weeks, has indicated that the American economy needs to generate 100,000 jobs monthly to keep up with population growth, meaning the working-age population is growing slower than in previous years as the Baby Boomer generation retires and fewer workers replace them from the Millennials.
The unemployment rate, which does not include those who are underemployed or want to find a job but have stopped looking, remained at 5 percent. That is the benchmark many economists use to declare full employment and the possibility of favorable job market for employees. The October jobs numbers were also revised upwards to 298,000.
The Dow was up 226 points in morning trading, with the Nasdaq and S&P 500 at similar percentages.
The gains makes it easier for Yellen and the rest of the Fed to raise the rates starting this month in an effort to prevent inflation from rising too fast. But it also means some economists are worried that the increase will slow an already weak job recovery after the Great Recession.
“They should wait,” economist Elise Gould of the liberal Economic Policy Institute told Politico. “We won’t be at full employment until we see durable acceleration of wage growth. My main message is that yes, rates have been low for a long time, but the Fed should not move just so it can scratch a seven-year itch.”
Part of the reason liberal economists and some Democrats are fearful of an increased rate from the Fed is the long-term problems it could pose for Hillary Clinton, the left’s presumptive nominee. The fear is that a higher interest rate will stave real progress for wage gains and result in voters turning towards Republicans for answers to wage growth.
While that will surely be a point of discussion among politicians and political analysts, investors are showing that they are looking at the positives of the Fed’s pending rate increase, with the bond market hitting recent highs: the two-year Treasury note is coming close to 1 percent, a number that it hasn’t seen in five years.