Markets on the up after good news on US jobs

Global markets were given an end-of-week boost on hopes that the United States economy can avoid another recession.

The optimism was triggered by news the US unemployment rate had fallen from 9 per cent in October to 8.6 per cent last month, its lowest level in two and a half years.

Some 120,000 jobs were added during the month, according to official statistics, providing fresh evidence that the recovery in the world’s biggest economy is gaining momentum.

The number of jobs created in September and October was revised up by 72,000.

London’s FTSE 100 index closed up 1.2 per cent at 5,552.29, while European markets also ended higher. World stocks on the MSCI all-country index scored their biggest weekly gain in three years, although the Dow Jones ended flat after early gains.

Markets had already posted solid gains after central bank moves earlier this week cut funding costs for banks.

Signs that eurozone policymakers are working hard to agree a compromise deal ahead of a key summit next Friday also lent support to markets.

David Resler, chief economist at Nomura Securities in New York, said: “Overall, this is an encouraging report on the [US] labour market. But we shouldn’t get too excited that we’re going to see four-tenths of a per cent decline in the unemployment rate very often.”

Howard Wheeldon, senior strategist at BGC Partners in London, said that, while the numbers had been “well signalled”, they suggested the US economy was weathering the global economic storm.

“In our view, Europe implosion apart, short-term growth factors in the US economy outweigh the prospect of downside risk. On that basis, and if events in Europe fail to bite, US GDP growth expectation of close to 2 per cent next year are potentially realisable,” he said.

Pierre Ellis, at Decision Economics, pointed out that “a lot of the drop in the unemployment rate comes down to a decline in the size of the labour force, which is quite large”.