Strong Payrolls Increases Chances for Fed Funds Rate Hike

So, it turns out that Janet Yellen actually may have tipped her hand about a strong payrolls report after all. Last month’s weak payrolls report from September may have been a fluke. The U.S. Department of Labor reported on Friday morning that nonfarm payrolls rose by a whopping 271,000 in October.

Bloomberg had told investors and traders to expect only 190,000, and Dow Jones was calling for only 183,000.

Where the jobs report gets even more interesting is that private sector payrolls grew by 268,000. Bloomberg was calling for 174,000. The revisions also carried the day.

What also was interesting was that the report for September, which came in at a very weak 142,000 on a preliminary basis, was revised just a tad lower to 137,000. The markets were hoping that would be revised higher. Actually, the payrolls were revised higher on the private sector (much more important) to 149,000 from the preliminary 118,000.

Unemployment came in right in line with the Bloomberg and Dow Jones consensus estimates at 5.0%. Unfortunately, the labor force participation rate was static at 62.4%. Average hourly earnings were up 0.4%, versus the 0.2% expected, and the average workweek was static at 34.5 hours.

If you want to know what all this means, it means that a rate hike is now much more likely than the doubters would have believed. Maybe you should just see what Bloomberg’s economic summary says: BRING ON THAT RATE HIKE!

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