US employment boost raises prospect of four hikes in 2016

As The Bureau of Labor Statistics reports the latest US unemployment figures, Helal Miah, investment research analyst at The Share Centre, explains what it means for investors.

“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 percent. There were also upward revisions to the October and November figures.

“These numbers send the 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 immediate reaction on the stock market was positive while the dollar gained against its major global peers.

“Some have speculated that the Federal Reserve may retreat on its recent decision to raise US interest rates. 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.”