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US employment gains in October were broad-based, though manufacturing added no jobs and mining shed 4,000 positions. Photo: Bloomberg

Rate rise likely after US jobs surge

Jobless rate now at lowest level since April 2008, with nonfarm payrolls rising 271,000 in October

US job growth surged in October after two straight months of tepid gains, with the unemployment rate hitting a 71/2-year low in a show of domestic strength that makes it almost likely the Federal Reserve will raise interest rates in December.

Nonfarm payrolls increased 271,000 last month, the largest rise since December 2014, the Department of Labour said on Friday.

The solid gains added to robust car sales in painting an upbeat picture of the economy at the start of the fourth quarter.

The unemployment rate fell to 5 per cent, the lowest level since April 2008, from 5.1 per cent the prior month. The jobless rate is now at a level many Fed officials see as consistent with full employment.

Payrolls data for August and September were revised to show 12,000 more jobs created than previously reported.

With speeches from several Fed officials, including chairwoman Janet Yellen, suggesting a low bar for a December rate increase, economists say monthly job gains above 150,000 in October and November would be sufficient for the central bank to lift benchmark overnight borrowing costs from near zero.

The employment report joined October's strong services sector and car sales data in supporting views that economic growth will regain momentum in the fourth quarter after braking sharply to a 1.5 per cent annual pace in July-September.

Last month's rise in wages, which have been almost stagnant despite a tightening labour market, lifted the year-on-year reading to 2.5 per cent. That was the biggest increase since July 2009 and could give Fed officials confidence that inflation will gradually move towards their 2 per cent target. There were improvements in other labour market measures that Fed officials are eyeing as they contemplate raising rates for the first time since 2006.

A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell two-tenths of a percentage point to 9.8 per cent, the lowest level since May 2008.

But the labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, held at a near 38-year low of 62.4 per cent.

Employment gains in October were broad-based, though manufacturing added no jobs and mining shed 4,000 positions.

Manufacturing has been hit by a strong dollar, efforts by businesses to reduce bloated inventory and spending cuts by energy companies cutting back on well drilling and exploration in response to lower oil prices.

Construction payrolls, however, increased 31,000 last month, the biggest gain since February.

This article appeared in the South China Morning Post print edition as: Rate rise likely after US jobs surge
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