U.S. November payrolls seen strong, to
cement rate hike views
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[December 02, 2016]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. employers
likely boosted hiring in November amid growing confidence in the
economy, making it almost certain that the Federal Reserve will raise
interest rates later this month.
Nonfarm payrolls probably increased by 175,000 jobs last month after
rising by 161,000 in October, according to a Reuters survey of
economists. The Labor Department will release its closely watched
employment report on Friday at 8:30 a.m. (1230 GMT).
Other recent data has shown the economy growing at a brisk clip in the
third quarter, and shown gains in consumer spending, inflation, housing
and manufacturing early in the fourth quarter.
"The economy is in good shape. The Fed has the green light to raise
interest rates this month, and most likely they are going to raise a
couple of times next year," said Jack McIntyre, portfolio manager at
Brandywine Global in Philadelphia.
Economists said jobs growth could surprise on the upside, given that
Hurricane Matthew, which lashed the U.S. East Coast in October, likely
depressed the payrolls count in that month by as much as 40,000.
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In addition, first-time applications for unemployment benefits dropped
to 43-year lows in November and other labor market surveys were
generally strong last month.
"That drag (from the hurricane) should reverse and boost November
payrolls by a decent amount, supported by a shift to unusually mild
weather across the country in the first half of November," said Ted
Wieseman, an economist at Morgan Stanley in New York.
WAGE GROWTH TO SLOW
The unemployment rate is expected to have held steady at 4.9 percent
last month.
An anticipated pullback in wage growth after two straight months of
solid increases could put a wrinkle in an otherwise upbeat employment
report. Average hourly earnings are forecast increasing by 0.2 percent
after shooting up 0.4 percent in October.
The slowdown would lower the year-on-year gain in wages from October's
2.8 percent increase, which was the largest rise in nearly 7-1/2 years.
The expected moderation largely reflects a calendar quirk, which
economists expect Fed officials will overlook at their Dec. 13-14 policy
meeting.
"We would chalk up most of this weakness to calendar effects and look
through to the acceleration that has become more evident over recent
months," said Andrew Hollenhorst, an economist at Citigroup in New York.
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![](../images/120216pics/news_t35.jpg)
Job seekers fill out applications during the 11th annual Skid Row
Career Fair the Los Angeles Mission in Los Angeles, California, U.S.
on May 31, 2012. REUTERS/David McNew/File Photo
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While a surge in U.S. government bond yields and a rally in the
dollar in the wake of Donald Trump's election as the next president
had tightened financial market conditions, economists said it was
probably insufficient for the Fed to stand pat. The U.S. central
bank raised its benchmark overnight interest rate last December for
the first time in nearly a decade.
As the labor market nears full employment, job gains have slowed
from an average of 229,000 per month in 2015 to an average of
181,000 this year.
Still, the monthly increases are more than enough to absorb new
entrants into the labor 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.
Trump's plan to increase infrastructure spending and slash taxes
could encourage companies to boost hiring and spur an even faster
pace of economic growth over the coming years.
"Trump is inheriting a strong economy, an economy that is near full
employment and clicking on almost every cylinder. It has plenty of
momentum heading into 2017," said Ryan Sweet, a senior economist at
Moody's Analytics in West Chester, Pennsylvania.
Manufacturing payrolls likely fell for a fourth straight month in
November, while construction employment probably notched further
gains. A rebound in retail sector employment is expected after
October's surprise decline.
(Reporting by Lucia Mutikani; Editing by Leslie Adler)
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