BLBG: Payrolls Rise More Than Forecast as U.S. Jobless Rate Falls
Employers added more workers than forecast in November and the jobless rate dropped to a five-year low of 7 percent, showing further progress in the labor market that will help provide a spark for the U.S. economy.
The 203,000 increase in payrolls followed a revised 200,000 advance in October, the strongest back-to-back gain since February-March, Labor Department figures showed today in Washington. The median forecast of 89 economists surveyed by Bloomberg called for a 185,000 advance.
The pickup in employment, combined with faster wage gains and more hours, provides American workers with the means to spend and signals companies are confident that demand will improve. The data also underscore the view of Federal Reserve policy makers that labor conditions are brightening as they consider when to scale back record monetary stimulus.
“We’re on the verge of seeing an acceleration of the economy that’s going to be more led by the consumer,” Scott Anderson, chief economist at Bank of the West in San Francisco, said before the report. “You’re seeing improved income trends, reduced gasoline prices, and we’re getting further away from the payroll tax hikes” that kicked in at the start of the year.
The gain in employment was the biggest in three months. Estimates in the Bloomberg survey for payrolls ranged from increases of 115,000 to 230,000. Revisions to prior reports added a total of 8,000 jobs to overall payrolls reports in the previous two months.
Stock-index futures climbed after the figures, with the contract on the Standard & Poor’s 500 Index expiring this month rising 0.5 percent to 1,792.9 at 8:37 a.m. in New York. The yield on the benchmark 10-year Treasury note rose to 2.91 percent from 2.87 percent late yesterday.
Manufacturing Jobs
Factories in the U.S. took on the most workers since March 2012, employment in construction accelerated and payrolls in transportation and warehousing picked up, today’s figures showed.
The unemployment rate, derived from a separate Labor Department survey of households rather than employers, was forecast to fall to 7.2 percent. In October, joblessness rose for the first time in five months, reflecting workers furloughed during a federal government shutdown that lasted half the month.
The household survey also showed that the participation rate, which indicates the share of working-age people in the labor force, increased to 63 percent in November. A month earlier it fell to 62.8 percent, the lowest level since March 1978.
Private Employment
Private employment, which excludes government agencies, rose 196,000 after a revised 214,000 advance. Private payrolls were projected to rise by 180,000, the survey showed.
Factories added 27,000 jobs, helped by a pickup at automakers, after a 16,000 gain in October. Construction firms took on 17,000 workers.
Average hourly earnings increased by 0.2 percent to $24.15 in November from the prior month, and climbed 2 percent over the past 12 months.
The average work week for all workers climbed six minutes to 34.5 hours last month.
A faster pace of hiring is needed to help reduce slack in the labor market. Wage growth would lay the groundwork for increased consumer spending, which accounts for almost 70 percent of the economy.
Third Quarter
Household purchases grew in the third quarter at the slowest pace in almost four years and business spending on equipment was stagnant, a report yesterday showed.
The economy grew at a 3.6 percent annual rate from July through September, led by the biggest increase in inventories since early 1998, the Commerce Department said. Final sales, which exclude unsold goods, climbed 1.9 percent.
Fed policy makers are considering how and when to reduce asset purchases without triggering a rise in interest rates, which could erode progress in the labor market and slow economic growth.
Job gains have combined with lower gas prices, stock-market gains, higher home values and more available credit to fuel demand for big-ticket goods such as automobiles.
Cars and light trucks sold at a 16.3 million annualized rate in November, the fastest pace since 2007, according to figures yesterday from Ward’s Automotive Group.
Feeling Good
“We feel very good about the direction of the economy and our own momentum,” Kurt McNeil, vice president for U.S. sales and service at General Motors Co., said during a Dec. 3 sales and revenue call. “The economy is creating jobs and household wealth, energy costs are dropping, and credit is available and affordable.”
The energy sector has also been a bright spot for hiring, as America experiences an oil and natural gas boom.
“We’ll have a fairly aggressive hiring program over 2014 and through 2016,” Darin Holderness, chief financial officer at Midland, Texas-based oil and natural gas driller Concho Resources Inc., said in a Dec. 3 presentation.
Faster progress in the labor market could hasten the Fed’s decision to taper its current round of easing that began last year. At that time, more stimulus was needed to shore up the economy and speed America’s return to full employment. The central bank will slow its purchases after its March meeting, according to the median estimate in a Bloomberg survey of 32 economists taken last month.
The Fed said in its latest Beige Book business survey, released this week, that gains in manufacturing, technology and housing fueled “modest to moderate” economic growth from early October through mid-November.
“Hiring showed a modest increase or was unchanged,” the central bank said in its survey, which contains anecdotal reports from the 12 Fed district banks two weeks before the officials meet to set monetary policy.
To contact the reporter on this story: Jeanna Smialek in Washington at jsmialek1@bloomberg.net
To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net
