U.S. unemployment declines to eight-year low

The U.S. economy received some good news on Friday, as the Bureau of Labor Statistics reported that 271,000 non-farm jobs were added to the payrolls for the month of October. The number beat expectations by nearly 100,000 and brought the unemployment rate down to 5 percent.

Real unemployment, which includes part-time workers and those who have stopped looking for work, dipped to 9.8 percent – the lowest it’s been since May 2008.

In addition, the average wage increased nine cents to $25.20 per hour, representing a 2.5 percent annualized gain.

The strong October numbers signal a likely short-term interest rate increase by the Federal Reserve when the central bank’s Board of Governors meets again on December 16.

According to the 30-Day Fed Fund futures market, there is now a 70 percent chance that the overnight borrowing rate will increase by .25 percent at the end of the year.

As a result of the implied rate hike, the U.S. Dollar rose to a seven-month high relative to other currencies Friday, causing oil prices to tumble and short-term bond yields to rise.

“The economy is now strong enough to take a slowdown and to continue to move forward strongly”, said Brad McMillan, chief investment officer at Commonwealth Financial in Waltham, Mass. “That’s actually very encouraging for the next 12 to 18 months.”

While Friday’s numbers also show labor force participation remains at nearly 40-year lows (62.4 percent), GDP growth is expected to rise at an annualized rate of 2.5 percent in Q4, which would be a full percentage point more than the economy grew in Q3.

 

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