US unemployment rate falls to 5.6%
January 9, 2015, 7:13 pm

US Markets will now look to an upcoming meeting of the Federal Reserve for signs of a possible rate hike [Xinhua]

The Federal Reserve maintains that an unemployment rate between 5.2 and 5.5 per cent is a marker of a healthy economy.

The Department of Labor said on Friday that the number of jobs created by the economy in December came in at 252,000; November statistics showed a robust 353,000.

The average number of jobs created in the months October to December has been 289,000.

But from an annual perspective, 2014 ended at a better momentum than it started – reflecting a job market gain that is at its healthiest since 1999.

The Department of Labor says that three million more people gained wages than at the start of the year.

The Friday report was numbed by the fact that wage growth had fallen by 5 cents an hour.

Nevertheless, the US economy appears on track for a full recovery, analysts say, from the type of recession that continues to bog down most of Europe and other countries.

The onus now will be on the Federal Reserve which appears to be moving closer to raising interest rates for the first time since 2009 when it kicked off its stimulus scheme.

The question that markets will consider is whether the Fed will allow plummeting oil prices to impact their decision on rate hikes. The fear is that falling oil prices benefit consumers but are leading to deflation, albeit not on the scale currently plaguing Europe.

The most likely outcome is that the Fed will decide that falling oil prices are temporary – that energy markets will re-stabilize in the months to come – and that a low inflation rate (even below 1 per cent) will also not last long.

The Fed’s Open Market Committee (FOMC) next meets on January 27.

Source: Agencies