(Bloomberg) -- A stronger-than-forecast U.S. payrolls report strengthens the argument for the Federal Reserve to begin raising interest rates in June, after the jobless rate reached the range that officials view as full employment.

The jobs report looks “unambiguously strong” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC. “June is still the base case” for rates to rise, he said. “The probability of September is falling rapidly.”

Fed Chair Janet Yellen last week began to prepare investors for an increase this year, without saying that a move was imminent. She signaled in testimony to Congress that the policy-making Federal Open Market Committee may drop its pledge to be “patient,” which would mean that rates could be raised at any meeting.

“It now seems to be a done deal that the ‘patient’ guidance will be dropped from the March FOMC statement,” Harm Bandholz, chief U.S. economist at UniCredit Group in New York, wrote in a report. Aneta Markowska, chief U.S. economist at Societe Generale SA in New York, echoed that sentiment.

“It virtually cements the removal of the ‘patient’ language at the March meeting,” said Markowska. “It keeps the June rate hike in play.”

Unemployment fell to 5.5 percent in February, the lowest level in almost seven years, the Labor Department said Friday. Fed policy makers estimate full employment at 5.2 percent to 5.5 percent, according to their latest economic estimates released in December.

David Fuller's view

The Fed is gradually running out of reasons not to raise rates, unless of course today’s data proves to be an anomaly, is revised in March, and unemployment is seen to be edging higher once again when the latest figures are released a month from now.  Monthly economic data has often shown an inconsistent trend over the last five years, in line with a gradually and erratically recovering economy.  Moreover, there may be a delayed reaction to the sharp slowdown in US oil production and also the unusually cold winter in the North-eastern portion of the country, although this is now ending. 

Nevertheless, the often vociferously pessimistic views in recent years are testing credulity.  1) This ‘new normal’ is no more than a typically slow recovery following a credit crisis recession more severe than any seen since the 1930s.  2) There is more positive than negative deflation due to accelerating technological innovation.  3) QE did cushion the US economy during its most vulnerable period, and it has not slumped since the third round asset buying programme was ended in October 2014.  4) Further testimony to the US economic recovery is provided by the US Dollar Index’s persistent rally since July 2014.  5) Several other central banks have adopted Ben Bernanke’s QE experiment, most notably the Bank of Japan and the European Central Bank, albeit in this latter instance three years later than Mario Draghi might have wished, due to political opposition which he was finally able to overcome.  6) US 10-Yr Treasury bond yields are currently experiencing their strongest rally since 2013, having found good support from the region of the 2012 trough. 

The next problem for investors is unlikely to be in leading stock markets, although historically they have always been somewhat volatile.  They may be a little nervous as the Fed’s first rate hike since the financial crisis approaches, but a gradual normalisation of monetary policy is a sign of strength, rather than a further crisis as previously feared.  However, this may come as a shock to many bond holders.  A rapid rise by US 10-year Treasury bond yields over 3% would cause considerable profit erosion on positions and indicate a developing bear market in the fixed interest sector.