Jobs data raise odds of rate rise

‘strong result’

WASHINGTON• The odds of a Federal Reserve rate rise in September improved after the best jobs report in five months eased concerns that the U.S. economy is struggling to regain momentum after a firstquarter contraction.

“I would characterize this as a very strong result,” said Carl Tannenbaum, chief economist at Northern Trust Corp. “It certainly brings a September rate increase into much clearer focus.”

Employers added 280,000 workers to non-farm payrolls in May, beating the median forecast in a Bloomberg survey, figures from the Labor Department showed Friday. Average hourly earnings rose 2.3 per cent from May 2014, exceeding the average gain since the current expansion began six years ago.

Fed Chair Janet Yellen and her colleagues are trying to figure out if economic weakness at the start of the year is transitory or longer-lasting, as they consider the timing of their first rate rise since 2006. Fed officials next meet to discuss policy on June 16-17, and Yellen will hold a press conference after the gathering.

“If you’re Janet Yellen, and you’re looking for all the check boxes, this jobs report definitely met them,” said Guy Lebas, managing director at Janney Montgomery Scott LLC.

The figures released Friday also show that the labour force participation rate rose, a sign that people outside the workforce were encouraged to begin seeking employment.

Investors brought forward their expectations for the timing of liftoff. Bets in interestrate futures markets show the odds for a move in September rising to 33 per cent from 27 per cent prior to the payrolls data.

Policy-makers want to let readings on the economy dictate the timing and pace of rate increases. They want to see continued improvement in the labour market and have reasonable confidence that inflation is heading back toward their two per cent goal before acting.

“If the labour market continues to improve and inflation expectations remain wellanchored, then I would expect — in the absence of some dark cloud gathering over the growth outlook — to support a decision to begin normalizing monetary policy later this year,” New York Federal Reserve president William Dudley said in remarks prepared for a speech Friday.