October 6, 2017 / 2:38 PM / 10 months ago

U.S. September jobs data raise U.S. December rate-hike bets

NEW YORK (Reuters) - U.S. interest rates futures fell on Friday as traders raised their bets on the Federal Reserve raising rates in December after data showed faster wage growth and the jobless rate hitting its lowest level in more than 16 years in September.

Federal Reserve Chairman Janet Yellen speaks during a news conference after a two-day Federal Open Markets Committee (FOMC) policy meeting in Washington, U.S., September 20, 2017. REUTERS/Joshua Roberts

On the other hand, domestic employment fell for the first time in seven years because of Hurricanes Harvey and Irma.

The September payrolls overall were still seen as supportive for a possible rate increase at year-end, analysts said.

“The most important aspect of the report is that we continue to see a buildup in wage pressure,” said Gregory Daco, head of U.S. economics at Oxford Economics in New York.

Average hourly earnings grew 0.5 percent last month, bringing their annual increase to 2.9 percent, which was the largest gain since December 2016.

The unemployment rate fell to 4.2 percent, the lowest level since February 2001.

Nonfarm payrolls, however, fell by 33,000 jobs in September, compared with 90,000 increase forecast among analysts polled by Reuters.

At 10:02 a.m. (1402 GMT), federal funds futures implied traders saw a 93 percent chance that the U.S. central bank would hike interest rates at its Dec. 12-13 policy meeting FFZ7 FFF8, up from 83 percent shortly before the release of the September payrolls data, CME Group’s FedWatch tool showed.

The latest jobs report also increased expectations for another rate increase in mid-2018.

Fed funds futures suggested a 58 percent chance of a rate increase to at least 1.50-1.75 percent at the Fed’s meeting on June 12-13, 2018 FFM8 FFN8. This compared with a 46 percent probability a week earlier, according to CME’s FedWatch.

Reporting by Richard Leong; Editing by Lisa Von Ahn and Grant McCool

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