Strong US Jobs Report Lifts Bets on a December Fed Rate Rise
US employers added 165,000 jobs in October, far above forecasts, and traders now see a December Federal Reserve rate rise as the likely outcome.
- US employers added 165,000 jobs in October, against forecasts of roughly 65,000, while the unemployment rate fell to 4.1 per cent.
- Futures markets now imply around a 79 per cent chance of a Fed rate rise on 9 December, up from 71 per cent a week earlier, and the November jobs report is due on 4 December.
- The US dollar index was steady at 102.20 early on Monday after jumping around 0.7 per cent on Friday, its largest one-day gain in nearly six months.
The United States labour market delivered a stronger-than-expected performance in October, and traders have raised their bets that the Federal Reserve will lift interest rates again in December. Employers added 165,000 jobs during the month, against forecasts of roughly 65,000, while the unemployment rate fell to 4.1 per cent, according to data from the Bureau of Labor Statistics published on Friday 6 November. Source: Reuters
Earlier figures were also revised upwards: job gains for August and September rose by a combined 84,000, suggesting the labour market entered the autumn in better shape than first reported. The figures landed just over a week after the Fed voted to hold its benchmark rate at 3.75 to 4.00 per cent. Source: Cambridge Currencies
Markets moved quickly. The US dollar index, which measures the currency against six major rivals, was steady at 102.20 early on Monday after jumping around 0.7 per cent on Friday, its largest one-day gain in nearly six months. The dollar traded close to a one-and-a-half-year high against the euro. Futures markets now imply around a 79 per cent chance that the Fed will raise rates on 9 December, up from 71 per cent a week earlier, according to CME Group's FedWatch tool. Source: Reuters
Other pricing points the same way. Money markets tracked by LSEG put the chance of another quarter-point rise next month at about 75 per cent, with some estimates closer to 80 per cent. Resilient hiring, the reading goes, gives the Fed room to act against inflation still above its 2 per cent target. Source: Morningstar
Comments from Federal Reserve officials on Friday reinforced that reading. New York Fed President John Williams said growth had stayed remarkably resilient despite successive shocks, but inflation was too high and had to return to 2 per cent. St. Louis Fed President Alberto Musalem said inflation remained a top concern in conversations with businesses in his district, while San Francisco Fed President Mary Daly said the Fed would probably still need to raise rates further, even with the recent sell-off in technology shares. Source: Reuters
Other central banks are tightening too. The Bank of England raised Bank Rate to 4 per cent on Thursday 5 November, in an 8–1 vote, and warned that at least one further rise was likely. The Bank of Canada raised its key rate to 2.5 per cent, and Australia's Reserve Bank has raised rates five times this year. Source: Morningstar
For borrowers and savers, a December rise would extend a year that has run against expectations. At the end of 2025, rates were cut to 3.50 to 3.75 per cent and further cuts were expected in 2026. Instead, the Fed's own projections now point to a year-end median rate of 4.1 per cent, implying one more quarter-point rise this year and little movement through 2027. Source: Motley Fool
Two data releases will test that outlook first. October consumer-price inflation is due on Tuesday 10 November; analysts at ING expect headline and core inflation to rise by 0.3 per cent month on month, a pace they say would keep a December rise looking likely. Producer-price inflation follows on Friday 13 November, and the November jobs report is due on 4 December, five days before the Fed's decision. Source: Morningstar
Fed officials are also due to speak during the week, including Governors Christopher Waller, Michelle Bowman and Michael Barr and Vice Chair Philip Jefferson. Barring a major downside surprise in Tuesday's inflation data or the November jobs report, a 25 basis-point rise should be near fully priced by the time the committee meets. The October jobs report has shifted the debate from whether the Fed will raise rates again to whether anything in the coming data can still stop it. Source: Morningstar
Frequently asked questions
How many jobs did the US add in October? Employers added 165,000 jobs, against forecasts of roughly 65,000, and the unemployment rate fell to 4.1 per cent.
When will the Fed decide on rates? The Fed's decision is due on 9 December, with October consumer-price inflation due on 10 November and the November jobs report due on 4 December.
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