Strong hiring across the U.S. economy in November lent fresh support Friday to the Federal Reserve embarking on a long-awaited series of interest rate hikes later this month.
The U.S. economy pumped out 211,000 new jobs last month, and the previous two months were significantly better than previous estimates, the Labor Department reported.
The unemployment rate was unchanged at 5.0%, the lowest level in seven years and down from 5.8% a year ago, as the U.S. economy continues to fend off the drag from the slowdown in the global economy.
A broad range of industries were expanding payrolls at a strong pace: construction, retail trade, finance, education and health, business services, and restaurants and hotels. Even government, long a weak spot in hiring, joined in with 14,000 net new positions.
There were still weaknesses in the report: average wage gains remain slow — up just 0.16% from October; the ratio of working age people participating in the labor force is historically very low; and the number of people forced to take part-time jobs increased by 319,000 to a still-large 6.1 million.
But overall the report indicated a firming of the jobs market and a resilience in growth that would allow the Fed to begin raising its benchmark federal funds rate after keeping it locked near zero for nearly seven years, economists said.
No Big Numbers for Manufacturing
The manufacturing sector, though, did not register significant numbers, actually losing 1,000 jobs in the month and continuing a soft hiring trend for the year. (September and October were both upwardly revised, with 2,000 more manufacturing jobs each month than initially reported.)
"Manufacturers have added no net new workers since January, with the sector mired by global headwinds and lower commodity prices," National Association of Manufacturers chief economist Chad Moutray said. "These challenges have dampened demand and production for manufacturers, and as a result, hiring has slowed to a standstill. As such, even as we have seen better labor market numbers in other pockets of the economy, the manufacturing sector continues to struggle.
"The sluggish growth in the manufacturing sector does continues to beg pro-growth policies, particularly those which help to make firms more competitive globally."
Alan Tonelson, who covers manufacturing and broader economic issues for RealityChek, noted that manufacturing’s share of total employment has plunged to a record low 8.62%, and its 0.08% monthly wage increase is about half that of the overall private sector’s.
Manufacturing has recovered about 865,000 of the 2.293 million jobs lost during the recession and its aftermath, Tonelson said, about 37.72% of the total. Additionally, while total private sector employment is about 4.26% higher than it was at the beginning of the recession, manufacturing employment is still 10.39% lower.
“Manufacturing’s job-creation performance … continued contrasting strikingly with that of the overall U.S. economy,” Tonelson said.
Strong support for rate hike
The data added support for the confidence that Fed chair Janet Yellen expressed on two occasions this week that the U.S. economy is growing at a steady, moderate pace and will continue to do so for the next few years, and is resilient enough for higher rates.
The jobs numbers are “certainly no reason for the Fed not to tighten on December 16,” said Jim O’Sullivan of High Frequency Economics.
“The Fed will raise rates in December and data are now being watched primarily to determine how quickly rates rise next year and beyond,” echoed Chris Low, economist at FTN Financial.
With the November report, the average monthly increase in jobs over the past 12 months is 237,000, and the number of officially unemployed people has fallen by 1.1 million. That comes despite a strong contraction in the mining industry, due to the plunge in oil prices, where jobs continue to bleed, down 123,000 since December.
Yet the continued sluggishness of wage gains, and the high numbers of part-time workers remain signs of persistent slack in the jobs market. And at 62.5%, the labor force participation rate remains near its lowest level in almost four decades.
In a speech Wednesday, Yellen conceded those weaknesses, which for some argue against raising the fed funds rate.
“A significant number of individuals now classified as out of the labor force would find and accept jobs in an even stronger labor market,” she said. “Some who are counted as out of the labor force might be induced to seek work if the likelihood of finding a job rose or if the expected pay was higher.”
But she argued that over the coming year these indicators of slack will disappear with continued overall economic growth.
Average hourly wages, up 2.3% year-on-year in Friday’s Labor Department report, supported Yellen’s argument that wage gains were accelerating after a long period of stagnation.
“All of this is consistent with a labor market that is beginning to tighten,” said Nariman Behravesh, chief economist at IHS Global Insight.
By Paul Handley
Copyright Agence France-Presse, 2015