Friday's Non-Farm payroll report contained surprised many economists. U.S. job growth remained solid in November and the unemployment rate fell to the lowest level in five years, dropping 7 percent, one signal of stronger U.S. economic growth.
The government's jobs report found 203,000 jobs were added in November, higher than the 180,000 figure anticipated by Wall Street analysts. September and October payroll numbers were revised up by a combined 8,000. Payroll growth is on track for the best year since 2005.
The NFP report also indicated several other factors that could bring the Federal Reserve a step closer to curtailing its massive monetary stimulus and could put into place QE tapering at the end of 2013 as suggested by Federal Reserve Chairman Ben S. Bernanke back in June.
QE (Quantitative easing) is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy has become ineffective. A central bank will QE by buying specified amounts of long term financial assets from commercial banks and other private institutions, thus increasing the monetary base and lowering the yield on those financial assets. This differs from the more usual policy of buying or selling government bonds in order to keep interbank interest rates at a specified target value. QE is often used to help ensure that inflation does not fall below target.
Bernanke had mentioned that QE tapering could begin when the unemployment rate drops to 7% and that the rates will remain low until a level of 6.5% is hit. These thresholds could bring even a small tapering into play.
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The Commerce Department reported on Thursday that the U.S. economy grew faster than expected, showing an annualized rate of 3.6 percent in the third quarter. Meanwhile, the Bureau of Economic Analysis reported that as a percentage of GDP, corporate profits reached a record of 10.8 percent. Compared to national income, profits are nearly at a record, at 11.7 percent.
The positive economic news in the U.S. together with the news of the rebounding of China's net crude imports by 19% boosted the price of global oil and signaled a recovery in the world's biggest oil consumers.
Not all economists agree, however, that the Fed will pull the trigger on QE at the December 17-18 policy meeting. Despite Friday's surprisingly strong report, they believe that the central bank will probably wait for more data before being certain that the job gains are sustainable and may want to make sure that lawmakers on Capitol Hill can strike a deal on the government budget in January.