US jobless rate falls to 9-year low, payrolls rise

WASHINGTON: The US unemployment rate fell to a nine-year low of 4.6 per cent in November, as employers added another 178,000 jobs, making it almost certain that the Federal Reserve will raise interest rates later this month.
The unemployment rate hit its lowest level since August 2007 because more people found work but also because the labour force shrank as more people retired, lowering the number of working-age people in the labour force to 62.7 per cent. US nonfarm payrolls increased by 178,000 jobs last month after increasing by 142,000 in October, the Labour Department said on Friday.
Economists had forecast payrolls rising by 175,000 last month and the unemployment rate remaining unchanged at 4.9 per cent.
“The decline in the unemployment rate and the unambiguous decrease in labour market slack are likely to place further upward pressure on inflation.
This report easily clears the bar for a December rate hike,” said Michael Gapen, chief economist at Barclays in New York.
Wages slipped for the first time in nearly a year though after two straight months of increases.
Economists partially blamed the drop in average hourly earnings on a calendar quirk, which they expect Fed officials will overlook at their December 13-14 policy meeting.
Average hourly earnings fell three cents, or 0.1 per cent, after rising 0.4 per cent in October and gaining 0.3 per cent in September.
Average hourly earnings fell for workers in mining, manufacturing and utilities in November.
Last month’s drop in wages lowered the year-on-year gain to 2.5 per cent in November from October’s 2.8 per cent increase, which was the largest rise in nearly 7-1/2 years.
“This is likely to be a temporary setback, as further tightening in labour market conditions should increase competition for skilled labour and support stronger wage growth,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Michigan.
A broad measure of unemployment, that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell two-tenths of a percentage point to 9.3 per cent, the lowest level since April 2008. After a rally of about 6 per cent in the past three weeks, US stocks ended little changed in the wake of the jobs data on Friday.
US Treasury bond yields on Friday eased from multi-month highs after the worst sell-off in debt markets in nearly eight years following the election of Donald Trump as US president in early November.
Trump’s plan to increase infrastructure spending and cut taxes could encourage companies to boost hiring and spur an even faster pace of economic growth over the coming years, analysts said.
Job gains have slowed from an average of 229,000 per month in 2015 to an average of 180,000 this year as the labour market nears full employment.
Still, the monthly increases are more than enough to absorb new entrants into the labour market.
Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working-age population.
“It is not that firms aren’t trying to hire, they just cannot find qualified workers at the wages they want to pay,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.— Reuters