US Rate Hike In Focus As Job Creation Soars

The American economy created far more jobs in July than was forecast - though the jobless rate remains unchanged at 4.9%.

The prospect of the US central bank raising interest rates, as its UK counterpart is forced to cut them, is back in focus following another big jump in American employment.

Official figures showed the US economy created 255,000 net new jobs in July, though the unemployment rate remained static at 4.9% - reflecting a jump in the numbers starting to look for work.

There was also better news on wage rises - with salaries growing at a rate of 2.6%.

Jobs growth and wages have been key factors in the deliberations for the Federal Reserve over the timing of a possible interest rate rise.

The job figures suggest firms may have shrugged off concerns expressed by the Fed about world economic weaknesses, including the impact of the UK's vote to leave the European Union.

While policymakers will be encouraged, economic growth has remained stubbornly sluggish - at an annual rate of 1%.

It is for this reason that financial markets are sceptical the Fed will raise rates this year.

Stock markets jumped on the jobs data - with traders citing positive sentiment from not only the US figures but also the Bank of England's stimulus programme announced on Thursday.

Policymakers in London decided to cut the Bank's core interest rate to a new low of 0.25% and confirmed further measures to stoke spending - with governor Mark Carney citing the effects of the referendum.

The Bank also gave notice that further rate cuts could follow and hinted that its policy action should be supported by Government spending.

The Bank rate had, until Thursday, been at its financial crisis low of 0.5% since March 2009.

The Fed raised its benchmark rate for the first time since the Great Recession last December and meets again on 20 September to mull its next move.

Russ Mould, investment director at AJ Bell, did not expect the rate-setting committee to pull the trigger on a rate rise after that meeting.

He said the Fed would be "well aware that the Bank of England, Bank of Japan and European Central Bank are all loosening policy.

"Even a whiff of a rate rise could send the dollar rocketing and put pressure on American economic growth," Mr Mould warned.