U.S. private employers boost hiring; consumer spending rises

November 30, 2016 09:15 AM

U.S. private employers stepped up hiring in November and consumer spending increased last month, the latest signs of economic strength that could further cement the case for an interest rate hike from the Federal Reserve next month.

The ADP National Employment Report showed on Wednesday that private payrolls increased by 216,000 jobs this month, well above economists' expectations for a gain of 165,000 jobs. The report is jointly developed with Moody's Analytics.

The ADP figures come ahead of the Labor Department's more comprehensive employment report on Friday, which includes both public and private sector payrolls. Economists polled by Reuters are looking for non-farm employment to have risen by 175,000 in November after increasing by 161,000 in October.

In a separate report, the Commerce Department said consumer spending, which accounts for about 70% of U.S. economic activity, increased 0.3 %after an upwardly revised 0.7 %gain in September.

Economists had forecast consumer spending would rise 0.4 %last month. Spending in September was previously reported to have risen 0.5%.

Prices of U.S. Treasuries were trading lower while U.S. stock index futures were slightly higher. The dollar rose against a basket of currencies.

Wednesday's data came on the heels of reports on the housing market and manufacturing that have suggested the economy sustained its momentum early in the fourth quarter after growing at its quickest pace in two years in the July-September period.

The government reported on Tuesday that gross domestic product increased at a 3.2% annual rate in the third quarter, driven by strong consumer spending and a surge in soybean exports.

A strengthening economy, together with a labor market that is near full employment could make the Fed comfortable to hike rates at its Dec. 13-14 policy meeting. The U.S. central bank raised its overnight benchmark interest rate last December for the first time in nearly a decade.


Inflation gaining 

With consumer spending firming, inflation continued to gain steadily in October. The personal consumption expenditures (PCE) price index rose 0.2 %after a similar increase in September.

In the 12 months through October the PCE price index rose 1.4 percent, the biggest gain since October 2014, after increasing 1.2 %in September.

Excluding food and energy, the so-called core PCE price index gained 0.1 %after rising by the same margin in September. That left the year-on-year increase in the core PCE at 1.7 %in October. The core PCE has increased by that same margin for three straight months.

The core PCE is the Fed's preferred inflation measure and is running below its 2 %target.

The uptick in price pressures, however, curbed the gain in inflation-adjusted consumer spending, which increased 0.1 %last month after rising 0.5 %in September. That suggests some moderation in consumer spending this quarter from the third quarter's solid 2.8 %pace.

Overall consumer spending last month was lifted by a 1.0 %increase in purchases of long-lasting manufactured goods such as automobiles. Spending on services fell 0.2 percent.

Personal income rose 0.6 %last month after increasing 0.4 %in September.

Wages and salaries advanced 0.5 %for a second straight month. Savings increased to $860.2 billion from $814.1 billion in September. That was the highest level since March of this year.

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