December marked the first interest rate increase in the USA for almost a decade, ending seven years of record low rates (for interest, the previous hike in June 2006 took rates from 5 to 5.25%). The 0.25% increase is modest and has been on the cards for a rather long time, but it is a step into the unknown and its effects will be closely scrutinised.
It is unlikely that the rate rise will harm a reasonably robust US jobs market – one long standing caveat to a rate rise was that unemployment had fallen below a certain point (originally 6.5%) – when Bernanke (then Fed Chairman) last raised rates, unemployment stood at 4.6% with interest rates at 5%. However, there is genuine concern that it might do so. For this reason, the last unemployment data prior to the rise (well…) will be a useful yardstick. According to the US Bureau of Labor Statistics, the US economy created 292000 jobs in December. The figure came in above most analysts’ expectations and means that the economy has generated an average 284000 jobs per month for the final quarter of 2015; the best rate for a year.
US unemployment remains at its best rate for seven-and-a-half years of 5% - the rate reflects the fact that roughly 200000 new jobs must be created each month for the employment rate to remain static due to increases in the population of the US of employable age. Data for October and November were subject to an upwards correction that found an additional 50000 jobs were created.
On the negative side of the balance sheet, weak commodity prices led to 8000 fewer jobs in the mining sector, meaning that it has lost 129000 jobs over the course of 2015. Professional and business services, health care, the catering section and construction all saw new jobs created.