The US economy added 211,000 jobs in November, slightly better than expectations, with the unemployment rate remaining steady at 5%, the US Department of Labor announced on Friday.
Friday’s report is the last before the Federal Reserve meets on 15-16 December to determine whether it should raise interest rates. The last time the Fed raised interest rates was June 2006.
Friday’s job report would have had to have been a “disaster” for the Fed to delay raising interest rates, said economists. The addition of 211,000 jobs likely paves the way for a rate hike later this month.
Economists expected the US economy to add 200,000 jobs in November and the unemployment rate to remain unchanged at 5%, a seven-and-a-half-year low.
“This is exactly what the Fed is looking for: solid job growth – better than 200,000 – plus an upward revision to both September and October numbers; decent gain in average hourly gain; unemployment rate still at 5%,” said Gus Faucher, senior macroeconomist at PNC Financial Services Group. “This seals the deal on rate hike in couple of weeks.”
In October, US employers smashed expectations and added 271,000 jobs, the largest number of any month so far this year. Friday’s report included upward revisions to that number: according to the Department of Labor, an additional 27,000 jobs were created in October and about 8,000 more jobs were created in September than originally believed.
Employers have added a robust average of 237,000 jobs a month over the past 12 months. Figures from the payroll company ADP show private sector employers added 217,000 jobs in November – the most for five months.
Over the past few months, the Department of Labor has stressed wages, which it said was “the unfinished business of this recovery”. In November the average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $25.25, following a 9-cent gain in October.
“We have seen an acceleration in wage growth. It was 2.3% year-over-year in November; that’s a little bit down from October,” said Faucher. (In October that figure was 2.5%.) “It’s certainly up from where it has been for the past few years. That’s indicative of a tighter labor market and I think we will continue to see wage growth accelerate as the unemployment rate falls further. We are finally adding that piece, which is good news for consumer spending.”
As the unemployment rate has gone down, employers have had to offer better pay to attract better job applicants.
While economists like Faucher have declared this a “very good” report, not everyone agrees.
“While many people are saying this morning’s report clears the way for liftoff, it still is too soon to declare victory in the economy. We won’t be at full employment until we see durable acceleration of wage growth, and only once we have achieved full employment will all workers be able to get the jobs they need and the hours they want, and be better positioned to negotiate for higher pay,” said Elise Gould, senior economist at left-leaning Economic Policy Institute. “Yes, interest rates have been low for a long time, but the Fed should not raise rates simply to scratch a seven year itch.”
Economists expect the Fed to announce an increase in interest rates in the coming weeks.
“We will be looking, of course, carefully at tomorrow’s jobs report,” Janet Yellen, the head of the Federal Reserve, said on Thursday while testifying before the US Congress joint economic committee. “But we can’t overweight any particular number. We need to be looking at underlying trends in the data and not overweight any number.”
According to Jim O’Sullivan, chief US economist at High Frequency Economics, recent jobless claims data shows no signs of labor market weakening. Last week’s claims came in at 269,000 – 9,000 more than the week before – but still near levels last seen in 1973.
“The claims data suggest that the trend in employment growth remains more than strong enough to keep the unemployment rate trending down over time,” said O’Sullivan.
Faucher, of PNC, agreed.
“When Yellen spoke on Wednesday and then again on Thursday, she talked about things that can change Fed’s mind, but certainly this isn’t going to change their mind. This is what they have been looking for,” he said.
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