US payrolls rise solidify during Nov; jobless rate at 9-year low

Average hourly earnings fall 0.1 pct

WASHINGTON, Dec 2, (RTRS): US employers boosted hiring in November and the unemployment rate dropped to a more than nine-year low of 4.6 percent, making it almost certain that the Federal Reserve will raise interest rates later this month.

Nonfarm payrolls increased by 178,000 jobs last month after increasing by 142,000 in October, the Labor Department said on Friday. The solid employment gains likely reflect growing confidence in the economy, which has been marked by rising consumer spending and inflation.

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The unemployment rate fell three-tenths of a percentage point last month, hitting its lowest level since August 2007, because more people found work as well as dropped out of the labor force. The decline in unemployment was concentrated among men. Mohamed El-Erian, chief economic adviser at Allianz in Newport Beach, California, described the jobs report as “solid” and said it would further encourage the Fed to hike rates in mid-December.

“Were it not for the less strong wage growth, this report would have also inclined the Fed to be aggressive about the future path of rates given the strong improvement in the unemployment rate and the decline in the participation rate.”

Economists had forecast payrolls rising by 175,000 jobs last month and the unemployment rate unchanged at 4.9 percent.

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A pullback in wage growth after two straight months of solid increases, however, put a wrinkle in the otherwise upbeat employment report. Average hourly earnings fell three cents, or 0.1 percent, after shooting up 0.4 percent in October.

The drop lowered the year-on-year gain in wages to 2.5 percent in November from October’s 2.8 percent increase, which was the largest rise in nearly 7-1/2 years. The moderation largely reflected a calendar quirk, which economists expect Fed officials will overlook at their Dec. 13-14 policy meeting.

A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell twotenths of a percentage point to 9.3 percent, the lowest level since April 2008.

US Treasury prices extended gains while US stock index futures trimmed losses after initially dipping following the release of the report. The dollar fell against a basket of currencies.

Spending

The employment report joined reports on consumer spending, the housing market and manufacturing in suggesting the economy continued to gain momentum in the fourth quarter after output increased at its fastest pace in two years in the July-September period.

While a surge in US government bond yields and a rally in the dollar in the wake of Donald Trump’s election as the next US president had tightened financial market conditions, economists said it was probably insufficient for the Fed to stand pat on rates this month.

The US central bank raised its benchmark overnight interest rate last December for the first time in nearly a decade. As the labor market nears full employment, job gains have slowed from an average of 229,000 per month in 2015 to an average of 180,000 this year. Still, the monthly increases are more than enough to absorb new entrants into the labor market. Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working-age population.

Trump’s plan to increase infrastructure spending and slash taxes could encourage companies to boost hiring and spur an even faster pace of economic growth over the coming years.

The labor participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.1 percentage point to 62.7 percent last month, not too far from multi-decade lows, in part reflecting demographic changes.