US Jobs Stable, But is the US Economy Ready for Faster Rate Hikes?

Based on the fast growth of payrolls this past November, it's almost certain that the Federal Reserve will raise interest rates, the first time in nine years. The announcement will come on December 16.

The report from the Bureau of Labor Statistics on jobs in the US has fulfilled the expectations of economists. Economists predicted that the United States would gain 200,000 jobs in November, but the report actually puts that number closer to 211,000. They also predicted an unchanged unemployment rate of 5% and the rise of average hourly earnings to 0.2%; both numbers have followed the predictions.

The report gives hard evidence that the United States economy is generally in good shape, based on the consistent job growth and low unemployment rate that encourages employers to offer their workers higher raises. Fed Chair Janet Yellen had an optimistic outlook stating, "growth is likely to be sufficient over the next year or two to result in further improvement in the labor market."

Neil Irwin, with the New York Times, explains that despite the encouraging job growth statistics, these numbers have been moving in the way they have been for the past couple years. In other words, they do not indicate any progress on any key weaknesses of the economy, for instance the major departure of millions of workers who left their jobs during the recession and haven't returned. These progress indicators are what the Fed would use to show that the economy is ready to move quickly towards increases in interest rates.

After the Fed positively affirms the question of increasing of interest rates, the question becomes when the Fed will do it again. The point of the question being that the economy's health is based on how quickly the country will move toward the higher rates.

Larry Elliott, economics editor at The Guardian, warns that this follow up question may cause problems. "It is entirely possible that the economic data for the last couple of months of 2015 will suggest that the US economy is stronger than it is. That would put pressure on the Fed for further interest rate increases that it might live to regret."

So barring any big surprises before December 16, it is very likely that the Federal Reserve will raise interest rates. The numbers from the report support that decision, but also indict how much further the US economy has to go to repair itself.