8th January 2016
The latest employment figures from the US will calm the nerves of investors concerned about China.
The US Bureau of Labor Statistics reported a surge in the number of jobs created in December as non-farm payroll grew 292,000 during the month. The unemployment rate stood at 5%.
Economists were pleased by the last minute job creation momentum as they had been expecting the figure to come in at 200,000 new positions.
Helal Miah, investment research analyst at The Share Centre, said the news from the US would be a boost for investors who are struggling against tumultuous Chinese stockmarkets.
’Given the China-led volatility the markets were hoping for a set of US jobs numbers to calm the nerves. Investors will be reassured to hear that 292,000 jobs have been created, far in excess of the 200,000 that markets had anticipated, with the unemployment rate holding steady at a lowly 5%,’ he said. ‘There were also upward revisions to the October and November figures.’
He added that the numbers were a ‘signal’ that the world’s largest economy ‘still remains on a steady path to economic growth, which should give investors the confidence they need after a terrible start to the New Year’.
The stockmarket reaction to the numbers was positive and the dollar gained against its major global peers but rumours that the US Federal Reserve would now retreat on its rate rise seem to be put to bed.
‘Some have speculated that the Fed may retreat on its recent decision to raise US interest rates,’ said Miah.
‘The market was pricing in two-to-three rate hikes during 2016 compared to the four the Fed had indicated prior to today’s data. These latest figures suggest that the gap between the market and Fed’s expectations will narrow.
‘However, it is likely that rate hikes will be gradual and we therefore still believe that the stock market still represents the best asset class for total return for longer term investors.’