The dollar soared and bond yields spiked as hiring by US employers surpassed Wall Street expectations and sparked heightened speculation that the Federal Reserve is nearing its first interest-rate rise in nearly a decade.
Employers added 295,000 jobs in February in defiance of bad weather and the unemployment rate fell to 5.5 per cent, the lowest level since 2008.
The US has now seen its longest streak of monthly jobs gains above the 200,000 mark in 20 years.
Yet markets have focused on sluggish wage growth as they argue that the Fed will hold fire rather than rushing to raise official interest rates.
February’s job gains led to a sharp reassessment of that view. The dollar, which was already up 0.5 per cent against the euro before the jobs report, extended its gains to 1.6 per cent, with declines in emerging market currencies and bonds gathering pace.
Key economies
The resurgence in the US contrasts sharply with the performance of other key economies. The
European Central Bank
is about to embark on bond purchases as it seeks to crank up euro area growth,
Japan
is continuing to battle against deflation, and
China
this week cut its growth target to 7 per cent.
Investors exited positions across the treasury yield curve – with heavy selling hitting interest rate sensitive two-year notes as well as longer-dated maturities including the seven-year note and 30-year bond. The yield on the 10-year treasury, which moves inversely to its price, soared 13 basis points to 2.24 per cent, its highest level since December.
"This is a wake-up call for the markets," said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh. "They had been behind the Fed and are now catching up."
The US northeast was hit by snowstorms during the month, with Boston seeing its snowiest month on record but the adverse conditions did not appear to impair recruitment.
Hiring was led by restaurants and bars, professional business services, building and healthcare.
A falling oil price took its toll on the drilling sector, as mining jobs dropped 9,000.
Unemployment
The rate of unemployment fell from 5.7 per cent to 5.5 per cent, edging the labour market ever closer to Federal Reserve officials’ estimates of full employment and heightening pressure for rate increases.
The US has seen the longest streak of private-sector job gains on record, with 12 million jobs added over 60 straight months and last year was the best for jobs growth since 1999.
Over the past year, the number of unemployed people is down 1.7 million, while the number of long-term unemployed has fallen 1.1 million.
Copyright The Financial Times Limited 2015
