WASHINGTON | The U.S. economy generated another month of solid hiring in November, making it highly likely that the Federal Reserve will raise interest rates from record lows this month.
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In November, 60.5% of industries reported higher employment, the largest share since February and up from September’s five-year low of 54.2%. Anecdotal evidence, as well as data on labour-related costs, suggest that tightening job market conditions are starting to put upward pressure on wages.
“While this report can help justify a rate hike in December, it can’t justify anything more than a very gradual path of rate hikes”, said Brian Jacobsen, chief portfolio strategist for Wells Fargo Funds Management.
American exports of goods and services sank to a three-year low in October, government data released Friday shows.
Over the past few months, the Department of Labor has stressed wages, which it said was “the unfinished business of this recovery”.
Average hourly earnings, which have risen 2.3 percent over the past 12 months, rose in November to $25.25, up $0.04 from the previous month and $0.57 higher than in the 11th month of a year ago. The Dow Jones Industrial Average jumped 1.4 percent in early trading, while the Nasdaq and S&P 500 rose 1.3 percent and 1 percent respectively. “Today’s report reinforces our view that underlying domestic demand appears to be solid enough for the Fed to finally depart from its zero interest rate policy this month”.
Nonfarm payrolls increased a seasonally adjusted 211,000 in November, the Labor Department said Friday. That pushed up a broader measure of unemployment – that includes those workers, the unemployed as well as discouraged Americans who have stopped looking for jobs – to 9.9% from 9.8%. The workweek was steady at 34.5 hours and the labor force participation rate nudged up to 62.5% from 62.4%.
The healthy job figures indicate that consumer spending is helping the economy surmount some lingering challenges. It would take a jobs number of 100,000 or below “to make the Fed take notice” and consider holding off again on raising rates. Additionally, “over the month, support activities for mining and coal mining lost 7,000 and 1,000 jobs, respectively”.
Other recent payroll indicators have been mixed. Average monthly job creation for this year so far is now 210,000, substantially less than the average for 2014 of 260,000.
UniCredit’s chief economist Harm Bandholz believes that the latest unemployment data should dispel any doubts about the incoming rate hike later this month.
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Manufacturing has been crippled by a strong dollar, efforts by businesses to reduce bloated inventory and spending cuts by energy companies scaling back well drilling and exploration in response to sharply lower oil prices.
