US employment report smashes forecasts with 321,000 new jobs created

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US jobs report beats forecasts as 321,000 positions added in November

European stock markets have also surged tonight, with Germany’s DAX hitting a record closing high.

Shares rose on the back of the US jobs report, and on speculation that - despite the divisions at its heart - the ECB will launch a QE programme early next year.

The news that 321,000 new jobs were created last month is no reason to celebrate, argues the Republican party.

Reince Priebus, chairman of the Republican National Committee, argues that a 300,000-plus jobs report should be a regular event, not the best in almost three years.

The pound has hit its lowest level against the US dollar in 15 months, hitting $1.5572 after the jobs report.

The US Federal Reserve could start to raise borrowing costs next spring, given the strength of today’s jobs report, suggests Paul Ashworth of Capital Economics:

The massive 321,000 gain in non-farm payrolls in November, together with the 44,000 upward revision to the two preceding months, bolsters our view that the Fed will begin to hike interest rates as soon as March next year.

As Fed officials keep stressing, the decision is data dependent and these data are pretty conclusive: Labour market conditions are improving at breakneck speed.

And the bond market agrees. The yields, or interest rates, on US Treasuries have risen, showing that prices have dropped. That suggests traders anticipate an interest rate rise sooner than they did before.

Almost two-thirds of the US jobs created in the last year are in sectors that pay below the average rate, flags up Société Générale’s top currency strategist Kit Juckes:

The US dollar will keep climbing if the next few Non-Farm Payroll reports are as strong as today’s “whopper”, says Ranko Berich, head of market analysis at Monex Europe:

“If results like this become the norm, the dollar’s meteoric appreciation will be difficult to stop and tighter monetary policy will become a foregone conclusion.

However there is still cause for caution in the US and, with winter looming, if the economy cools with the weather the dollar is at lofty heights to fall from.”

I missed this detail earlier.... factory workers’ pay rises lagged behind the average last month; a sign that the recovery isn’t being shared widely enough.

The US economy isn’t a complete bed of roses, though. The latest factory orders data just hit the wires, and it’s worse than expected.

Orders fell by 0.7% month-on month in October; economists expected a flat reading.

And if you strip out transportation, orders were down by 1.4%.

Mads Koefoed, head of macro strategy at Saxo Bank, agrees that today’s report brings the first US rate rise closer (and ‘fesses up that his guesstimate was too pessimistic)

What a report!

The November US employment report blew all expectations out of the water with a gain of 321,000 in nonfarm payrolls. Nearly 100,000 more than the 230,000 expected by consensus and even further from my 207,000 estimate based on other labour market indicators.....

Overall, this was a very good employment report. Go ahead FOMC, raise that rate!

Wall Street has taken the jobs report in its stride; the Dow Jones industrial average is up just 0.15% in early trading at 17926.

The US dollar just hit its highest level against a basket of currencies since March 2009.

Thomas Perez, the US secretary of labor, has told Bloomberg TV that the improvements in the economy this year will lift wages higher in 2015.

Dr Tara Sinclair, chief economist at Indeed.com and Professor at George Washington University, is upbeat about the forecast-smashing jobs report:

“2014 is on track to be the best year for US job gains since 1999. This report means a very Merry Christmas for the U.S. The big question today is why the labor participation rate remains unchanged with so many jobs being created?

Workers will now have greater choice than they have had in years. If you’re not happy in your job, start looking for a new one! If you left the workforce during tighter times, now is the time to get back into the market. With job creation on this scale, 2015 should be the year people make those career changing resolutions!

Peter Elston, global investment strategist at Seneca Investment Manager, reckons the recent slump in the oil price should give the US employment market another boost:

“In light of the recent fall in the oil price, which will have a positive impact on aggregate demand, the chances of further improvement are higher than they were back in June.

“That said, we are now in the sixth year of the recovery and it’s surprising, given all the monetary stimulus, that employment growth has not been stronger.

We have yet to see whether the US economy can absorb the impact of the end of the Fed’s bond buying program in October, he adds.

Rob Carnell of Dutch bank ING says the hawkish members of the Federal Reserve may be heartened by the 321,000 surge in US employment last month:

There is no doubt that this is an impressive figure, and will give the hawks at the Fed a bit more fire in their bellies at the next FOMC meeting. But the detail of the release is a bit less impressive on further inspection.

The household survey rose only 4,000. And as a result, the unemployment rate went nowhere, staying at 5.8%.

Economics professor Justin Wolfers says we shouldn’t get excited about wages, just because average hourly earnings grew by 0.4% in the month.

But he agrees that it’s a strong non-farm payroll report:

The US dollar has surged on the back of the jobs report.

This drove the Japanese yen to new seven year lows, at ¥121.3 to the $1.

Some more detail... the labor force participation rate was unchanged, at 62.8%.

The under-employment rate dipped, to 11.4% from 11.5%.

On an annual basis, US wages rose by 2.1% in November. That’s an increase on the 2.0% recorded in October.

That’s good, but still below the trend before the financial crisis, and only slightly above the US inflation rate of 1.7%.

This is the 10th month running that America has now created at least 200,00 new jobs, according to the non-farm payroll.

That’s the best stretch since 1994, when Bill Clinton was in situ in the Oval Office.

Important point -- average hourly earnings rose by 0.4% last month. That’s stronger than expected, and suggests that the US recovery is feeding through to consumers.

This is a strong jobs report, no doubt about it.

More good news -- September and October’s Non-Farm Payroll reports have been revised higher, to show an extra 44,000 new jobs created over those two months.

The US unemployment rate remains at 5.8%, a six-year low.

President Obama will be looking for signs of wage growth in today’s non-farm payroll report.

Earlier this week, he said that he has deep concern that wages and incomes have not risen significantly, despite corporate profits hitting their highest levels in 60 years.

London-based economist Marc Ostwald predicts we’ll see a “solid, if unspectacular gain” on non-farm payroll. The key, he adds, is the “breadth” of job creation -- ie, which firms took on more staff.

The oil price is dipping back towards five-year lows today.

Brent crude is now down at $69.11 per barrel, down from $69.64 last night.

US crude is changing hands for $66.35, down from $66.83.

This chart, via fastFT’s Robin Wigglesworth, shows the likely impact on inflation if oil keeps falling:

More quotes from Bundesbank chief Jens Weidmann have arrived.

He warned that quantitative easing might not work in the eurozone, even though it did help the American economy to recover:

“You cannot simply apply the same formula in Europe that has enjoyed success in the U.S. or in Japan”

“In the USA, there is a central state that issues bonds that are very safe and secure. We don’t have that central state here,”

And he rejected the idea that economic weakness required an expansive monetary and fiscal policy (as Keynesians believe).

“I am not convinced of this. Rather, I am of the view that this approach is not the solution, rather the cause (of economic woes).”

Three former ICAP brokers have pleaded not guilty in London this morning to criminal charges they had sought to manipulate benchmark interest rates, Reuters reports.

That brings to six the number of not guilty pleas since regulators worldwide began investigating allegations that traders had conspired to rig foreign exchange rates.

Colin Goodman, Darrell Read and Danny Wilkinson entered their pleas at London’s Southwark Crown Court, Reuters adds.

Mixed news for UK rail passengers today.

Fares will increase by 2.2% in 2015, the slowest rate since 2010, but more commuters will be pushed into the £5,000-a-year price bracket for a season ticket.

More here: Lowest rail fare increase for five years

Mark Ostwald, economist at ADM Investor Services, says the 2.5% jump in German factory orders confirms that Germany’s economy is recovering.

However, they also “do not imply a marked pick-up in growth”, a point hammered home by the Bundesbank’s new forecasts.

The Mayor of London’s special economic advisor, Gerald Lyons, has tweeted about the Bundesbank’s new, more pessimistic forecasts:

Another encouraging signal – Spain’s industrial production grew at a faster pace in October. It was up 1.2% year-on-year, a rise on 1.0% in September. More here.

The battle to control Canary Wharf took another twist; its owner, Songbird, has rejected the £2.6bn final cash bid launched by Qatar’s sovereign wealth fund and a North American property firm yesterday.

The Qatar Investment Authority (QIA), which already owns nearly 29% of Songbird, and Brookfield offered to pay 350p a share, after their initial 295p offer was rejected last month.

My colleague Julia Kollewe explains:

Songbird’s shareholders now have 60 days to decide whether to accept the pair’s “take it or leave it” bid, raised from £2.2bn. It came 90 minutes before a regulatory deadline on Thursday and cannot be raised again.

But the board of Songbird said it was still too low, pointing to a recent independent valuation that estimated its net asset value at 381p a share, up 19% since June.

ING’s Carsten Brzeski suggests Germany’s economy is recovering now that the summer hols are over:

Coming up soon...the second estimate of eurozone GDP for the third quarter, at 10am GMT.

That’s likely to confirm that the euro area grew by just 0.2%.

Finland’s statistics board has already released its updated figures - confirming that the Finnish economy grew by 0.2% in the third quarter. It also hiked its Q2 growth to 0.4%, which means Finland’s economy is now slightly larger than a year ago (it went into recession last winter).

The forecast-beating 2.5% surge in German factory orders in October suggests Europe’s economy is in better shape than feared.

So reckon Nick Kounis, economist at ABN Amro.

Stefan Kipar, an economist at BayernLB, reckons Germany’s economy is back on track after a ropey summer:

“There’s a good chance that negative GDP growth rates can be avoided in winter too,”

European stock markets have opened higher, after sliding yesterday after the ECB dashed hopes of QE this year.

The French CAC and German DAX are both up around 1%.

Back to yesterday’s ding-dong battle at the European Central Bank over whether to unleash QE to fight off deflation....

Analysts at Japanese bank Nomura reckon the ECB is almost certain to launch a big quantitative easing programme soon, having agreed to reassess the situation in the new year.

UBS, though, is concerned that the governing council, and the smaller executive board, are split over Draghi’s intention to expand the ECB’s balance sheet by up to €1trn:

Jens Weidmann also suggests that the slide in the oil price could boost Germany’s economy next year.

He says:

“If crude oil prices remain at this subdued level for an extended period of time, economic growth in 2015 and 2016 could turn out to be between 0.1 and 0.2 percentage point higher in each case.”

There’s a subtext here; yesterday, Mario Draghi said the deflationary impact of the oil price could trigger a QE programme early next year.

Weidmann, who opposes QE, is clearly in the ‘cheap oil is good’ camp.