The US economy added 178,000 jobs in November while the unemployment rate fell to its lowest level since 2007, suggesting the US Federal Reserve is on track to raise interest rates this month.
The jobs tally was just shy of economists’ expectations for 180,000. That compared to the 142,000 jobs it created in October.
While the data showed that election jitters did not hurt hiring in the world’s largest economy, US wage growth logged its first monthly decline since December 2014.
But the unemployment rate slid to 4.6 per cent — its lowest level in 9 years — from 4.9 per cent the previous month. That came as the labour force participation rate slid to 62.7 per cent, from 62.8 per cent previously.
“This was the last hurdle on the path to a December hike, and it has been cleared convincingly,” Luke Bartholomew at Aberdeen Asset Management, said. “It is now incredibly hard to imagine what would stop the Fed from going.”
Markets had already priced in a 100 per cent chance that the Federal Reserve would raise interest rates at its December meeting.
Average hourly earnings unexpectedly slid 0.1 per cent in November from the previous month, compared with expectations for a 0.2 per cent gain. That saw the year-on-year pace cool to 2.5 per cent, from 2.8 per cent in October, and caused US short-term treasury yields and the dollar to take a dive. The US dollar and treasury yields dived following the release but quickly recovered.
The jobs figures were the latest data confirming that Donald Trump will inherit a strengthening US economy when he becomes president in January.
This week GDP numbers showed that the world’s biggest developed market grew at an annualised rate of 3.2 per cent in the third quarter. A closely watched measure of US home prices in September also shot past a peak set at the height of the housing boom in 2006, as home prices across the nation continued to post steady gains that could signal that the post-recession housing market has turned a critical corner.
James Smith at ING called the earnings slip in Friday’s data “shocking” but one that would not force the Fed to change tack on its 2017 rate hikes if it proved to be just a “blip”.
“That weak wage figure will probably raise a few eyebrows among some of the more dovish Fed voters,” he said. “But it would have had to have been a really disastrous jobs report to have derailed the FOMC’s plans to hike in December.”
Justin Wolfers, an economist at the University of Michigan, tweeted that November’s numbers showed nascent upward wage pressure seemed to have “disappeared”.
IIan Shepherdson at Pantheon Macroeconomics attributed the drop in hourly earnings mainly to a quirk in how the data are collected.
“The hit in November is quite large, relative to the prior trend, but it is inside the bounds of previous experience. We expect a hefty rebound in Dec,” he wrote in a note.