Hopes of half-point Fed rate cut slim
Monday, 10 December 2007
Daniel Pimlott in New York and Krishna Guha in Washington
THE likelihood that the Federal Reserve will cut interest rates by more than a quarter point next week fell sharply last Friday after new figures showed the US economy continued to add jobs at a decent rate last month.
The overall jobs growth came even though employment fell in construction, real estate and financial services, suggesting the housing downturn and credit crisis so far remain contained. The rise in jobs was, however, less than in the previous month, signalling a slowing economy.
Non-farm payroll data from the labour department showed that numbers of employed people rose by 94,000 in November, following a 170,000 surge in October.
The unemployment rate remained at 4.7 per cent. Economists had expected 80,000 jobs to be created and unemployment to rise to 4.8 per cent.
Carlos Gutierrez, US commerce secretary, told the Financial Times that these were "very welcome numbers", adding: "We will continue to see consistent, reliable jobs growth."
However, jobs figures for the previous two months were revised down by a total of 48,000, while the University of Michigan survey of consumer confidence suggested Americans were more downbeat about the future than at almost any point in more than a decade.
The sustained growth in jobs suggests that consumer spending is likely to be resilient, and should moderate the spread of credit problems from housing into credit cards and car loans.
Yields on US Treasuries rose after the report. In New York, the yield on the benchmark 10-year Treasury was up 9 basis points at 4.10 per cent. The Fed has been expected to cut rates by at least a quarter point to 4.25 per cent next week.
Some observers have been calling for a half-point cut, but the continued jobs growth plus an uptick in consumer's inflation expectations in the Michigan survey make that less likely.
Under syndication
arrangement with FE
THE likelihood that the Federal Reserve will cut interest rates by more than a quarter point next week fell sharply last Friday after new figures showed the US economy continued to add jobs at a decent rate last month.
The overall jobs growth came even though employment fell in construction, real estate and financial services, suggesting the housing downturn and credit crisis so far remain contained. The rise in jobs was, however, less than in the previous month, signalling a slowing economy.
Non-farm payroll data from the labour department showed that numbers of employed people rose by 94,000 in November, following a 170,000 surge in October.
The unemployment rate remained at 4.7 per cent. Economists had expected 80,000 jobs to be created and unemployment to rise to 4.8 per cent.
Carlos Gutierrez, US commerce secretary, told the Financial Times that these were "very welcome numbers", adding: "We will continue to see consistent, reliable jobs growth."
However, jobs figures for the previous two months were revised down by a total of 48,000, while the University of Michigan survey of consumer confidence suggested Americans were more downbeat about the future than at almost any point in more than a decade.
The sustained growth in jobs suggests that consumer spending is likely to be resilient, and should moderate the spread of credit problems from housing into credit cards and car loans.
Yields on US Treasuries rose after the report. In New York, the yield on the benchmark 10-year Treasury was up 9 basis points at 4.10 per cent. The Fed has been expected to cut rates by at least a quarter point to 4.25 per cent next week.
Some observers have been calling for a half-point cut, but the continued jobs growth plus an uptick in consumer's inflation expectations in the Michigan survey make that less likely.
Under syndication
arrangement with FE