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 Nonfarm payrolls increased by 203,000 jobs last month, following a
similarly robust rise in October, the Labor Department said on
Friday. The report, which showed broad gains in employment and a
rise in hourly earnings, suggested strength in the economy heading
into year-end.
"It will add further confidence to the Fed of a reduced need for
monetary stimulus in the U.S. economy. We now see the bias shifting
in favor of a January tapering announcement," said Millan Mulraine,
senior economist at TD Securities in New York.
The unemployment rate dropped three tenths of a percentage point to
its lowest level since November 2008 as some federal employees who
were counted as jobless in October returned to work after a 16-day
partial shutdown of the government.
The decline came even as the participation rate — the share of
working-age Americans who either have a job or are looking for one — bounced back from October's 35-1/2-year low.
A separate report showed improving labor market prospects buoyed
consumer confidence in early December.
Contributing to its firm tone, the jobs report showed that the
length of the average workweek reached a three-month high and that
8,000 more workers were hired in September and October than
previously reported.
In addition, a measure of underemployment that includes people who
want a job but who have given up searching and those working
part-time because they cannot find full-time jobs fell to a
five-year low.
U.S. benchmark Treasury yields hit a three-month high as traders
raised bets the Fed could reduce its bond purchases as early as its
next meeting on December 17-18, though they later eased back and
finished the day little changed. Major U.S. stock indexes rose, with
the S&P 500 ending a five-day losing streak with its best gain in
nearly a month.
The financial market reaction showed investors are less anxious
about the Fed's impending wind down of asset buying than six months
ago, when the first hints from Fed leaders of a pullback sent stock
prices tumbling and bond yields surging.
The central bank has been buying $85 billion in Treasury and
mortgage-backed bonds each month to hold long-term borrowing costs
down in a bid to spur a stronger economic recovery.
Chicago Fed President Charles Evans, who has been an outspoken
advocate for the Fed's stimulus program, said on Friday he was open
to trimming purchases this month, although he would prefer to see an
even healthier jobs market.
"I'll be open-minded," he told Reuters Insider. "Everything else
(being) equal, I would like to see a couple of months of good
numbers, but this was improvement."
Many economists still expect the central bank to wait until March
before dialing back its bond purchases, but a Reuters poll of big
bond dealers found a growing number now see December or January as
likely.
MIXED ECONOMIC DATA
While labor market and consumer spending indicators are
strengthening, the housing market and business spending have slowed.
Inflation is still low, which economists say will make Fed officials
cautious in pulling back its stimulus.
Economists also believe the Fed will be wary of dialing back bond
purchases before lawmakers strike a deal to fund the federal
government. That could come as soon as next week, however.
Congressional aides have said negotiators are down to the final
details.
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A separate report from the Commerce Department showed consumer
prices were steady in October, after having risen by 0.1 percent for
three straight months. Over the past 12 months, prices rose 0.7
percent, the smallest gain since October 2009.
Excluding food and energy, prices were up just 0.1 percent for a
fourth straight month. These so-called core prices were up only 1.1
percent from a year ago. Both inflation measures remained well below
the Fed's 2 percent target.
"While fiscal issues appear less ominous and employment prospects
look favorable, we still think that before pulling back on asset
purchases the Fed would like to see more evidence that housing is
stabilizing and that inflation is finding a floor," said Michael
Feroli, an economist at JPMorgan.
The drop in the unemployment rate brought it closer to the 6.5
percent level that policymakers said would trigger discussions over
when to raise interest rates from their current levels near zero.
Some economists think the Fed will lower that threshold to convince
markets that any rate hike is a long way off.
"We expect that when tapering starts, it will be coupled with
stronger forward rate guidance, including a cut in the unemployment
rate threshold," said Ted Wieseman, an economist at Morgan Stanley
in New York.
DETAILS UPBEAT
The job gains in November were broad-based, with 63.5 percent of
industries increasing employment. Private-sector payrolls rose
196,000. But government employment also increased as hiring by state
and local governments offset a drop in federal employment.
Manufacturing payrolls moved up 27,000, the fourth straight monthly
gain and the largest since March 2012. Construction employment rose
17,000, building on an October increase even though the housing
market has lost some momentum.
Growth in retail employment slowed, with the sector adding 22,300
last month compared to 45,800 in October. A late Thanksgiving
holiday could have resulted in some seasonal hiring not being
captured in November's report.
Leisure and hospitality, as well as professional and business
services payrolls, showed gains, but at a slower pace than in
October.
Average hourly earnings rose by four cents last month, while the
length of the workweek edged up to an average of 34.5 hours from
34.4 hours — both bullish signs for the economy.
(Reporting
by Lucia Mutikani; additional reporting by Ryan Vlastelica in New
York and Ann Saphir in Chicago; editing by Andrea Ricci and Diane
Craft)
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