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Why today's jobs report is a big deal for the economy

Employers added 211,000 jobs in November, and the unemployment rate held steady at 5 percent, according to data released by the US Department of Labor Friday morning. Consensus expectations had been for 190,000 new jobs, so the report was a bit better than expected. That means the pace of job creation was good enough to make it all but certain that Janet Yellen and the Federal Reserve are done delaying and will raise interest rates at their December 17 meeting.

The Fed appears to have been eyeballing 100,000 new jobs as the minimum needed to make them comfortable proceeding with the rate hike, and this report easily clears that bar.

A small interest rate increase later this month should not, on its own, represent a dramatic change in economic circumstances. But the Fed hasn't raised interest rates since its June 2006 meeting, so there is plenty of curiosity as to how both financial markets and the real economy will react. The European Central Bank and the central bank of Sweden were both quicker than the Fed to enact their first post-recession rate hikes only to see themselves reverse course after their economies proved to be less robust than they hoped.

The Fed's 100,000-job line

The improving economy over the past two years has turned the once dramatic monthly jobs-day ritual into a lower-profile affair.

But this month's report is being closely watched, because the Fed has been hinting that this jobs report is the last decisive piece of data it was looking at before deciding to pull the trigger. In a speech delivered Wednesday at the Economic Club of Washington, Yellen laid out the case for a rate hike provided that evidence of "continued improvement in the labor market" continues to come in.

Then, in testimony to Congress's Joint Economic Committee, Yellen stated her view that given existing demographics the United States needs to create about 100,000 jobs per month to absorb the natural growth of the labor force.

Any job creation above that would be consistent with continued improvement in the labor market — either further cutting the unemployment rate or else drawing new people into the labor force out of the ranks of the discouraged. Yellen hasn't quite come out and said explicitly that 100,000 new jobs is the green light for a December rate hike, but she's dropped about as many hints as the Fed ever does about the future course of economic policy.

The urge to hike seems premature

Despite the improvement in the state of the labor market, there is little specific reason for the Federal Reserve to be shifting toward tighter money. Inflation is well below the Fed's 2 percent target, and has been for more than two years. The Fed simply seems impatient to abandon the zero interest rate policy that has prevailed since 2008 and wants to do so because the economy is now healthy enough to survive it.

Low interest rates offer a range of benefits to the economy, and until very recently it was the conventional wisdom that policymakers should keep rates low as long as possible.