US Data Seen As Catalyst For Interest Rate Hike
BRICS Post November 25, 2015,
The number of Americans applying for unemployment benefits has fallen consecutively for 38 months [Xinhua]
New Department of Labor data, which shows that the health of the US job market has improved to match levels in the 1970s, will likely be another boost for members of the Federal Reserve who want to see an interest rate hike in December.
Initial claims for state unemployment benefits came in at a seasonally adjusted 260,000 for the third week of November, the Labor Department said on Wednesday.
That figure is 12,000 below market forecasts.
Unemployment benefit claims have been below 300,000 for more than three years, the data shows.
The unemployment rate is five per cent.
US economic data had been generally positive over the summer leading to market speculation that the Fed would raise interest rates as early as September.
But the fallout from China’s economic slowdown and yuan devaluation forced the Fed’s hand and its Federal Open Market Committee (FOMC) feared the rocking of the boat effect any change in fiscal policy would have.
But now China appears to be back on track and the focus is on how well the US economy is performing.
Ahead of the latest unemployment claims data, San Francisco Fed President John Williams said in remarks carried by Reuters that if current data trends continue, there is a likelihood that interest rates will be raised in December.
“The data I think have been overall encouraging, especially on the labor market,” Williams said at a conference at the University of California Berkeley’s Clausen Center.
Meanwhile, the Department of Commerce released data on Wednesday which showed that the sale of single-family homes surged by more than 10 per cent in October, reversing a decline of previous months.
The number of new homes for sale also increased by 1.3 per cent, the highest level since 2010.
While other data showed that US economic growth had been revised up to 2.1 per cent for the third quarter, consumer spending increased by just 0.1 per cent in October.
Markets in the US will be closed for Thanksgiving on Thursday, which will kick off the holiday spending season – a good marker for testing the health of the economy.