US Job Creation Accelerates In December

The US created 292,000 new non-farm jobs in December, well above the expected 200,000.

The strength of jobs growth is being attributed to the mild weather in the US, which experienced its warmest ever December and second warmest ever year in 2015.

The unemployment rate in the country stayed flat at 5.0% which, when combined with the fact that new jobs have been created, shows the number of people searching for jobs in the US has altered.

As only 100,000 new jobs are needed each month to keep up with population growth, the unemployment rate should have dropped in September.

But as the jobs creation data and the unemployment rate are derived from separate surveys, the figures released today do not reflect this.

Wage data was less positive, with average hourly earnings flat against expectations of a 0.2% month-on-month rise.

The non-farm payrolls report is released on the first Friday of every month and covers all US jobs except agricultural workers, private household staff and those working for non-profit organisations.

What this all means for US interest rates is uncertain because - although the jobs figure was very strong - without wage growth inflationary pressures are likely to remain subdued.

According to Fed fund futures, financial instruments which help deduce rate hike probabilities, the chance of a March hike is now 38%.

The market is expecting three or four US rate hikes this year, which could bring the US rate to 1.5%.

Meanwhile the Bank of England is not expected to begin its tightening until early 2017, according to overnight index swap data.

The Federal Reserve's decision to tighten in December was also vindicated by news that jobs growth rate for October and November had been revised upwards to the tune of 50,000.

The markets took today's figures in their stride with the S&P 500 climbing moderately following the data release.