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Strong Labor Market Reading Sends Rates Higher

A strong payrolls report on Friday helped push yields slightly higher for the week, reversing a mid-week decline in rates.  November's job report beat expectations with 228,000 jobs added,versus expectations of 195,000.  The unemployment rate was unchanged at 4.1% as the labor force rose slightly, holding the labor force participation rate at 62.7%.  Average hourly earnings rose by 0.2% during the month, however, this was slightly lower than the expected 0.3% advance.  Nevertheless, wage pressures seem to be slowly rising despite the hourly earnings measure staying range-bound over the past two years.  The final positive component of the day's release was the increase in average weekly hours worked, which advanced to 34.5 from 34.4. 

The report is supportive of another 25 bp rate increase at Chairwoman Yellen's final FOMC meeting next week. The strong labor market and quiet inflation readings should give incoming Chair Powell a free hand to continue tightening monetary policy.

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