Job Growth in U.S. Exceeds Forecast, Foreshadowing Rate Increaseby
Employers added more jobs than forecast in November, underscoring Federal Reserve Chair Janet Yellen’s confidence that the U.S. economy is strong enough to withstand higher borrowing costs.
The 211,000 increase in payrolls followed a 298,000 gain in October that was bigger than previously estimated, a Labor Department report showed Friday. The median forecast called for a 200,000 advance. The jobless rate held at a more than seven-year low of 5 percent.
A healthy rate of hiring has raised the odds that Fed officials will raise interest rates this month for the first time since 2006. The pace of future increases is contingent on progress toward the central bank’s inflation goal and probably depends on how quickly wage pressures mount as the job market tightens.
“It was a broad-based gain across all sectors, and that’s absolutely essential,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, whose forecast for payrolls was among the closest. The jobs report “is a bright green signal for the Fed to go ahead and move in December,” and indicates future rate increases should proceed at a “moderate pace.”
Employee pay increased at a steady pace last month. Average hourly earnings at private employers rose 0.2 percent in November after a 0.4 percent gain. Year-over-year hourly pay rose 2.3 percent after a 2.5 percent gain a month earlier.
Employment in November was spurred by the biggest increase in construction hiring since January 2014. Retailers, health-care providers and leisure and hospitality companies added jobs at a healthy, but slower pace than in October.
Payroll estimates of 91 economists ranged from gains of 130,000 to 275,000 after a previously reported 271,000 October increase. Revisions to prior reports added a total of 35,000 jobs to overall payrolls in the previous two months.
Construction companies took on 46,000 workers, led by residential specialty contractors and boosted by warmer weather across much of the U.S. Payrolls at retailers rose by almost 31,000 in November, a step down from the month before.
Derived from a separate Labor Department survey of households, the underemployment rate, which adds in part-time workers who’d prefer full-time positions and people who want to work but have given up looking, crept up to 9.9 percent from 9.8 percent in October.
The figure reflected an increase in the number of Americans working part-time for economic reasons, one of Yellen’s favorite measures of labor-market slack.
The labor force participation rate -- the share of working-age people who are employed or looking for work -- rose to 62.5 percent from 62.4 percent. Participation has declined this year, part of a broader trend that Yellen has said is related to the aging of the U.S. population.
“I don’t think we should expect to see labor force participation move up a great deal over time,” she told the Joint Economic Committee of Congress on Thursday. “If it were simply stable over time rather than on that declining trend, I think we would be absorbing people who were perhaps discouraged,” Yellen also said. Fed policy makers next meet on Dec. 15-16.
With the Fed widely expected to raise rates in less than two weeks, the November jobs data will likely be used to guide the pace of future increases. Fed officials see a 74 percent chance of a hike, assuming that the effective funds rate after liftoff is about 0.375 percent.
Progress in the labor market has played a large role in building the Fed’s confidence that the economy can withstand higher interest rates. The second part of the central bank’s dual mandate -- stable prices -- has been more elusive. The Fed’s 2 percent target for inflation hasn’t be met since April 2012.
(Updates with economist’s comment in fourth paragraph.)