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Jobs report warms holiday spirits

By Mark Hamrick · Bankrate.com
Friday, December 6, 2013
Posted: 3 pm ET

Here's some broad-based good news for a change. The Labor Department says the unemployment rate dipped to 7 percent in November, the lowest in five years. Employers have continued to hire at a sustained, but modest rate of 200,000 jobs or more for the past two months.

There was across-the-board improvement among sectors, such as transportation and warehousing, health care, professional and business services, manufacturing and construction. Over the past year, some jobs reports had seen declines in the unemployment rate because people exited the workforce, or most of the jobs appeared to be low-paying positions. This time that wasn't the case.

Some employers continue to hold back though. As another series of budget and debt ceiling deadlines approaches in the coming weeks and months, it represents some risk. "It is important to note that there continues to be some degree of hesitance to bring on new workers," says Chad Moutray, chief economist for the National Association of Manufacturers. "This will keep hiring gains only modest at best, at least until uncertainties in the marketplace are removed or when demand picks up sufficiently to warrant it," he says.

The stock market embraced the news, as the key averages rose strongly after the release. What's different about that? Often in the past, good news was taken as bad on Wall Street, which had tended to cheer for more asset purchases by the Federal Reserve. With stocks up more than 20 percent this year, the fear has been that a decision by the Fed to begin to ease the pace of asset purchases could stop the rally cold. The initial reaction among stock investors was to jump in the market, once the good news was out.

The Fed's next policy-setting session looms in the middle of the month. It will be Chairman Ben Bernanke's last opportunity at a scheduled news conference to give his own characterization of the job market and what other members of the Federal Open Market Committee want. The central bank has encouraged growth through $85 billion in monthly asset purchases, but scaling back is likely. The question is timing. Moutray says, "If we continue to see non-farm payroll gains of over 200,000 and strong hiring across a broad-base of sectors, I suspect that the Fed will begin to taper. Look for that to happen perhaps as early as the January FOMC meeting, but definitely by the March meeting. All long-term asset purchases should end by the third quarter of next year."

Most members of the Federal Open Market expect the first increase in short-term interest rates will come in 2015. When do you expect the first rise in short-term interest rates?

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