November Payrolls Rise 211000, December Rate Hike On Track

Consider it a done deal.

United States 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 almost a decade.

The Labor bureau also revised September and October’s figures to show 35,000 more jobs than had been previously reported.

The unemployment rate in November held steady at 5.0%, unchanged from October.

“This is a green light, from our perspective”, said Phil Orlando, chief equity strategist at Federated Investors. Her remarks were widely seen as signalling a likely rate hike at the Fed’s mid-December meeting. U.S. Treasury debt yields initially rose, but later fell after OPEC failed to agree an oil production ceiling. The benchmark rate has been pegged at zero since December 2008 to underpin the recovery from the Great Recession.

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.

If hiring continues at a healthy pace next year, as most economists now predict, it could also blunt Republican criticism in the presidential campaign of Democratic economic policies, which have been a prominent target for the current crop of GOP candidates. October non-farm payrolls were increased to 298,00, up from 271,000, a number that far exceeded expectations last month and sparked a bond market sell-off in early November.

While payroll gains would need to be larger than that to encourage discouraged workers back into the labour force, even that threshold would still be “quite a bit less” than 200,000 per month, she said. “These data include a range of indicators regarding the labor market, inflation and economic activity”, Yellen told the JEC.

Traders in the federal funds futures market are betting the central bank will raise rates two or three times in 2016 after an initial move later this month. “We have a lot of room before we have an overheating economy that’s generating inflation”, Bivens said, arguing that the Fed should wait until wage increases ramp up before hiking rates. Instead it’s stepped up training and recruiting and is seeking to make it easier for employees with families to work part time.

Many private economists are forecasting the first rate hike by the Federal Open Market Committee, the Fed’s policy panel, will be a modest quarter-point move, followed by four more quarter-point moves over the next year. Even if the current trend continues, that jobs gap won’t be closed until mid-2017.

The Labor Department reported on Friday that the unemployment rate for November was the same as October.

In November, the average hourly wage was $25.25, an increase of 2.3 percent from a year ago. Job growth has been solid, and wages have begun to rise, but not so much as to cause concern about future high inflation. The jobless rate for those with a bachelor’s degree or higher was 2.5% in November, also unchanged from the previous month. Year over year, pay grew 2.3%, down from October’s six-year high of 2.5%.

The jobs numbers are “certainly no reason for the Fed not to tighten on December 16”, said Jim O’Sullivan of High Frequency Economics.

Restaurants and bars added 32,000 jobs; retail, 31,000; professional and technical services, 28,000; and health care, 24,000. Construction companies added 46,000 jobs, the most in two years. CEO Tiger Tyagarajan says Genpact has added about 400 people to its 4,000 person US workforce this year, many of them in highly skilled areas such as software programming and management consulting.