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Strong US jobs report makes rate hike likely

WASHINGTON — Employers in the United States continued to create jobs at a blistering pace last month despite the cold and snowy weather that blanketed large parts of the country, signalling a strong economy that could encourage the Federal Reserve to raise interest rates by the middle of the year.

WASHINGTON — Employers in the United States continued to create jobs at a blistering pace last month despite the cold and snowy weather that blanketed large parts of the country, signalling a strong economy that could encourage the Federal Reserve to raise interest rates by the middle of the year.

Non-farm payrolls surged 295,000, the Labor Department said yesterday, marking the 12th straight month of job gains above 200,000 in the longest streak in more than 20 years, underlining the robustness in the world’s largest economy. The unemployment rate fell two-tenths of a percentage point to 5.5 per cent, it added, the lowest level in almost seven years.

The job report handily beat expectations — economists had forecast payrolls would rise by 240,000 and the unemployment rate would tick down to 5.6 per cent — and weighed on US shares in early trading amid rate hike fears. About 10 minutes after the opening bell in New York, the Dow Jones Industrial Average was down 0.5 per cent at 18,042.

Yesterday’s job report came a little more than a week before the Fed’s two-day policy meeting beginning on March 17. Central bank policymakers are monitoring the employment data closely to help determine when enough pressure is building in the job market to merit higher borrowing costs to keep the economy from overheating.

With the sustained strength in the labour market, many economists expect the Fed to signal its openness to a June rate lift-off and drop a pledge to be “patient” in considering a hike.

“I think a 5.5 per cent unemployment rate clinches a June rate hike, which means ‘patient’ comes out in a week and a half,” said Lindsey Group chief market analyst Peter Boockvar.

The report highlights the increasing appetite among companies to boost headcounts as the surge in purchasing power from cheaper fuel supports consumer spending, the biggest contributor to the US economy.

However, a missing link continues to be faster wage growth, which will be needed to ensure household purchases accelerate. The report showed average hourly earnings rose by only three cents to US$24.78 (S$34.20) from a month earlier, driving the year-on-year gain to only 2 per cent. AGENCIES

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