WASHINGTON – The jobs picture brightened in November as hiring in the United States was stronger than expected and the unemployment rate fell to a 5-year low, data that increases the likelihood that the Federal Reserve will begin easing its stimulus efforts sooner rather than later.
Still, many observers cautioned that the encouraging figures from the Labor Department on Friday did not necessarily mean that the central bank will act when policymakers meet later this month. A move early next year, they said, is more likely.
While the 203,000 jump in payrolls in November was an improvement over the 158,000-a-month rate that prevailed in the summer, it is not much better than the 198,000 level in the first nine months of 2013.
“We think the chance of tapering this month has risen, but on balance we expect the Fed to wait a bit longer,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Michael Gapen, senior U.S. economist at Barclays, echoed Shepherdson’s view in terms of the Fed’s timing. “We consider it a strong report, but it’s not something that would cause the Fed to move,” he said. “Our scenario is still March.”
While the return of hundreds of thousands of federal employees after October’s government shutdown may have exaggerated the move in the unemployment rate for November, the continuing payroll gains suggest that the economy has picked up momentum very recently.
In November, the jobless rate dropped to 7 percent. Economists surveyed by Bloomberg before the Labor Department announcement had expected an increase of 185,000 jobs, with the unemployment rate falling by 0.1 percentage point to 7.2 percent.
“While the decline in the rate might be overstated, there is nothing here not to like,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh. “It is strong across the board.”
Faucher noted that hourly earnings and the length of the typical workweek both increased slightly in November. And employment increased in both the public and private sectors, despite continuing austerity at the federal level.
Payrolls are tracked using data gathered from employers, while the unemployment rate is based on a separately survey of households.
On Wall Street, the monthly report on the labor market is by far the most closely watched economic indicator, but the November data created more anticipation than usual, because the Federal Reserve seems poised to begin slowly easing back on its stimulus efforts. The move had been expected in September, but it was put off amid mixed economic data instead of the sustained signs of improvement policymakers want to see. The delay by the central bank caught Wall Street off guard three months ago.
But the spate of recent positive data, economists said, could bolster the case for the Fed to start pulling back in the coming months. The latest figures on hiring follow more robust data for economic growth and jobless claims Thursday and a report Monday showing increased activity at factories.
While welcome news for job seekers, a healthier labor market is likely to be viewed more warily by investors and traders, at least in the short term.
Stronger economic growth and employment gains should bolster corporate earnings and therefore stocks over time, but speculators fear that a quick Fed tapering could sap the stock market’s recent momentum. The Standard & Poor’s 500-stock index is up more than 25 percent in 2013. Stocks were higher in early trading Friday, with the S&P up about 0.8 percent.
Although the holiday shopping season seems to have gotten off to a mixed start, the retail sector added 22,000 jobs last month. Manufacturing, a sector that is closely watched as a bellwether for the broader economy, hired 27,000 workers. And the overall participation rate rose 0.2 percentage point to 63 percent, reversing a decline in recent months.
In particular, Gapen of Barclays said he was impressed by the rise in the number of jobs across a wide variety of sectors, both in services and in goods-producing industries.
Besides the jump in manufacturing jobs, he noted that the construction sector had gained jobs for the third month in a row, indicating that the housing sector continues to rebound.
Even as the overall unemployment rate fell, the situation does remain desperate in some pockets of the labor market.
For example, the unemployment rate among workers ages 16 to 19 remains above 20 percent. And for workers with less than a high school diploma, the jobless rate stood at 10.8 percent.