Bullish US employment report puts Fed under spotlight

US employers added the largest number of workers in nearly three years in November and wages increased, a sign of strength in the economy that could draw the Federal Reserve closer to raising interest rates.

Nonfarm payrolls surged by 321,000 last month, the most since January 2012, the Labor Department said on Friday. The unemployment rate held steady at a six-year low of 5.8 per cent.

"I think it will put pressure on the Fed to raise rates in the first half of next year by June, perhaps even March," said Craig Dismuke, chief economist at Vining Sparks in Memphis, Tennessee.

Data for September and October were revised to show 44,000 more jobs created than previously reported, adding more sparkle to the report. Economists polled by Reuters had forecast payrolls increasing by only 230,000 last month.

US stock index futures turned positive on the data. The dollar jumped against the euro to its highest level since August of 2012. The yield on the two-year Treasury note increased to its highest level since May 2011.

November marked the 10th straight month that job growth has exceeded 200,000, the longest stretch since 1994, and further confirmed the economy is weathering slowdowns in China and the euro zone, as well as a recession in Japan.

A separate report from the Commerce Department showed exports increased 1.2 per cent in October, helping to narrow the trade deficit. Exports to the European Union, China and Japan all increased.

There are signs the strengthening labor market conditions are starting to spur faster wage growth, a key factor that will determine the timing of the US central bank’s first rate hike.

Average hourly earnings rose by 9 cents in November, the largest increase since June of last year.

That left them up 2.1 per cent from a year ago - still well below the increase of 3 per cent or more that economists say would make the Fed comfortable lifting benchmark overnight rates from near zero, where they have been since December 2008.

Many economists expect the Fed to wait until mid-2015 before hiking rates.

Details of November's employment report were upbeat, with most of the measures Fed chair Janet Yellen tracks to gauge the amount of slack in the labor market showing further improvement.

A broad measure of joblessness 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 to a fresh six-year low of 11.4 per cent from 11.5 per cent in October.

The ranks of the long-term unemployed are also shrinking.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, was steady at 62.8 per cent.

Job gains were broad-based, with employment in professional and businesses services jumping by 68,000. Retail payrolls increased by 50,200 as employers stepped up hiring in anticipation of a strong holiday shopping season.

Manufacturing and construction employment accelerated from October. Government payrolls increased by 7,000. The length of the workweek increased to an average of 34.6 hours, the highest since May 2008, from 34.5 hours in October.

Reuters