The Federal Reserve's dual mandate is why American jobs data moves world markets

Background

Background to the United States employment report just published, which is read first of all as a signal for the Federal Reserve.
The Federal Reserve Act requires the Fed to conduct monetary policy "so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates".
Although the Act lists three goals, the directive is commonly known as the dual mandate, because stable employment and prices naturally support moderate long-term interest rates.
Monetary policy decisions are taken by the Federal Open Market Committee, made up of the Board of Governors together with the president of the New York Fed and four Reserve Bank presidents who serve in rotation. All twelve Reserve Bank presidents take part in the discussions, but only the voting members decide.
The committee judges that low and stable inflation at the rate of 2 per cent per year, measured by the annual change in the price index for personal consumption expenditures, is most consistent with achieving both parts of the dual mandate.
Because employment is half the mandate, every monthly jobs number is read as evidence on the direction of American interest rates.