Solid jobs report greenlights Dec rate hike
U.S. job growth increased solidly in November in a show of the economy's resilience, which most likely paves the way for the Federal Reserve to raise interest rates this month for the first time in nearly a decade.
Nonfarm payrolls increased 211,000 last month, the Labor Department said on Friday. September and October data was revised to show 35,000 more jobs than previously reported.
The unemployment rate held at a 7-1/2-year low of 5%, even as people returned to the labor force in a sign of confidence in the jobs market. The jobless rate is in a range many Fed officials see as consistent with full employment and has dropped seven-tenths of a percentage point this year.
"We cleared the last hurdle for a rate increase. The Fed was looking for some positive movement on wages, and we got a little bit of that. There is absolutely nothing in this report that will keep the Fed from raising rates," said Chris Gaffney, president at EverBank World Markets in St. Louis.
The closely watched employment report came a day after Fed Chair Janet Yellen struck an upbeat note on the economy when she testified before lawmakers, describing how it had largely met the criteria the U.S. central bank has set for the Fed's first rate hike since June 2006.
Yellen said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working age population.
The Fed's policy-setting committee will meet on Dec. 15-16. Market-based measures of Fed policy expectations assign a probability of 79.1% to the central bank's raising interest rates at that meeting, according to the CME Group’s FedWatch site.
The dollar extended gains against a basket of currencies, while prices for U.S. government bonds fell. U.S. stock futures extended gains.
The second month of strong job gains should allay fears the economy has hit a soft patch, after reports showing tepid consumer spending in October and a slowdown in services industry growth in November. Manufacturing contracted in November for the first time in three years.
Though wage growth slowed last month, economists say that was mostly payback for October's outsized gains, which were driven by a calendar quirk. Anecdotal evidence, as well as data on labor-related costs, suggest that tightening job market conditions are starting to put upward pressure on wages.