FXStreet (Mumbai) - The October non-farm payroll data released by the U.S. Bureau of Labor Statistics showed that over the past 12 months, the unemployment rate and the number of unemployed persons reduced by 0.7 per cent and 1.1 million, respectively. The non-farm payrolls grew 271,000 for October, a sharp jump from weak August and September numbers while the average hourly earnings increased 0.4%, from the prior month and 2.5% over the past year. Both the unemployment rate (5.0 per cent) and the number of unemployed persons (7.9 million) were essentially unchanged in October. Job gains mostly occurred in professional and business services, health care, retail trade and construction sectors.The October labour force participation rate remained unchanged at 62.4 per cent. The unemployment rate hit a 7-1/2-year low laying a strong ground for the Federal Reserve will hike interest rates in December. Employment data favours rate hike The U.S. Fed has maintained that the appropriate time to raise rates is when sustained improvement in the labour market is attained and when it is “reasonably confident” that inflation will move back to its 2 per cent target over the medium term. Job growth surged in October addressed the concerns that the global slowness was infecting the U.S. October’s nonfarm payrolls report increases the possibility of a rate hike in December. Following the release of the payroll report, traders believe there is a 74 per cent chance of a December rate hike, up from 58 per cent chance that they held prior to the release. Payroll numbers of the past months prove that the labour market has been registering steady growth. This takes care of one of the Fed’s concerns related to raising rates. Chicago Federal Reserve President Charles Evans told CNBC post the release of the report that the stronger-than-expected payroll number for October is "very good news" and supports his 2016 economic outlook of 2.5 per cent growth. The San Francisco Federal Reserve Bank President John Williams also told the Arizona Council on Economic Education, "I do think it makes sense to gradually remove the policy of accommodation that helped get the economy to where we are," Most FOMC members believe it would be appropriate to raise the federal funds target before the end of 2015. Boston Fed’s president Rosengren observed that recent reports on wages and salaries point towards few signs that the “tightening labour markets are translating to increases in wages and salaries consistent with reaching 2 per cent inflation”. Federal Reserve Governor Lael Brainard has also spoken about the steady improvement in the labour market. Inflation likely to move towards target soon The Fed had so been hesitant to raise interest rate as the inflation figures have been moving below the 2 per cent target. Fed policymakers had considered it wise to wait on a rate increase until evidences of prices firming surfaced. However, they now worry that postponing the decision to raise rates might lead inflation to become too high. The San Francisco Fed president is of the opinion that factors holding inflation down, like weak oil prices and a strong dollar, will soon “ebb” and allow inflation to bounce back. According to him beginning rate hikes sooner than later would allow a "smoother, more gradual process of policy normalization," December rate hike a strong possibility now The Fed has kept interest rates near zero for almost seven years now. The central bank in its October meeting announced that it was considering raising rates at its Dec. 15-16 meeting. The payroll figures have showed that the United States is closing in on full employment. The FOMC members read the slowdown in payrolls' growth as a sign of near-full employment and feel the time is appropriate to hike rates. Also, if statements of senior FOMC members are anything to go by, inflation is likely to rise to target levels. Hence the "next step" is definitely to start increasing rates gradually. Be it Fischer, NY Fed President Dudley or any other senior FOMC member; everybody holds the same stance that a December rate hike is ‘live’. For more information, read our latest forex news.