Personal Finance

Tom Hudson: If jobs numbers are strong, rate hike is likely

Janet Yellen will never be confused for Santa Claus. But the chairman of the Federal Reserve shares the habit of double-checking her work before coming to a conclusion.

Federal Reserve bankers will soon get their last major economic statistic before their interest rate meeting in mid-December. That’s the November employment data, which will be released on Friday. A strong month of both job growth and wage growth likely will seal the fate for the Fed to raise interest rates later in the month.

At it’s October meeting, most of the 10 members of the interest rate setting committee predicted the job market and inflation would be strong enough to withstand a small increase in borrowing costs. The policymakers call this “liftoff.” The Fed’s target interest rate has effectively been zero for seven years. The last time the Central Bank raised rates was in 2006.

The job market in October was surprisingly strong. Over 270,000 jobs were added. With the unemployment remaining the same at 5.0 percent, an autumn increase in wages may be even more important. The average hourly pay jumped 2.5 percent in October compared to a year earlier. It the strongest pay hikes in a year.

If the Federal Reserve is to act confidently at its December meeting, it will want to see continued economic conviction in jobs and pay raises.

As the jingle reminds us, even Santa Claus checks his list twice before making any decisions.

Financial journalist Tom Hudson hosts The Sunshine Economy on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.

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